Trump’s tax plan depends on the growth fairy

Rebekah Entralgo

Rebekah Entralgo Reporter, ThinkProgress

President Donald Trump is sending some of his top economic advisers on the media rounds this morning to defend his recently announced tax plan.

Treasury Secretary Steven Mnuchin told CBS and Fox Business this morning that Trump’s massive tax cut will actually cut the deficit by $1 trillion dollars, by creating an astounding $2 trillion in new revenues through economic growth. Mnuchin seems to suggest the plan will cost $1 trillion, although independent estimates peg the cost as closer to $5 trillion dollars. The administration has not released a detailed enough plan to make an actual estimate.

If this sounds too good to be true, it’s because it is.

Corporations would enjoy a healthy tax cut under the Trump tax plan, slashing the current 35 percent tax rate to 20 percent.Former Goldman Sachs COO and now Chief White House economic adviser, Gary Cohn, however, argues that this is “good for everyday American citizens.” Those who support cutting taxes for corporations believe that it frees up cash spurring more investments and more jobs.

This is the argument candidate-Trump made on the campaign trail to justify slashing corporate taxes last year during the first presidential debate.

“That’s going to be a job creator like we haven’t seen since Ronald Reagan,” Trump said. “It’s going to be a beautiful thing to watch. Companies will come. They will build. They will expand. New companies will start. And I look very, very much forward to doing it.”

There is little evidence to support this argument. The Institute for Policy Studies studied the changes in payroll at 92 publicly held U.S. corporations that were already paying federal income tax of less than 20 percent. (These companies, like many, were able to pay lower than the official 35 percent rate by claiming various exemptions and deductions.) What the study found was that more than half of these companies had actually scrapped jobs during the period when the economy as a whole increased payroll by 6 percent. So what did the corporations do with their tax savings? A majority of the companies in the study bought stock in their own companies in order to boost their company’s shares. This kind of activity benefits wealthy investor but has an extremely modest impact on actual economic growth.

This pattern is also confirmed in a 2011 Senate report, that saw many big tech companies actually shed jobs when enticed to repatriate their overseas cash holdings with a generous a tax holiday. According to the report, Hewlett Packard shed 8,000 US jobs and IBM shed 12,000.

Most economists no longer see tax cuts for corporations as a particularly effective way to spur economic growth. Corporate tax cuts might have been beneficial to President Reagan’s economy, but for Trump, an economy rife with start-ups means corporations are more likely to invest in research and automation to stay competitive: two measures that do not generally promote job growth.

Former Goldman Sachs COO and now Chief White House economic adviser, Gary Cohn told both Good Morning America and CNBC that the “wealthy are not getting a tax cut under [their] plan,” but they are, thanks to tax cuts for the top income tax bracket and the elimination of tax measures like the estate tax and the alternative minimum tax, both of which will end up putting more money in the pockets of the wealthiest Americans.

Tax cuts for the wealthy tend to spur less growth than those targeted toward the poor or middle class, who will quickly spend new income. The situation is even worse if tax cuts directed toward the rich are paired with cuts in public spending that help the working class, which is exactly what Trump is proposing.

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Reposted from ThinkProgress

Posted In: Allied Approaches

Union Matters

Get to Know AFL-CIO's Affiliates: National Association of Letter Carriers

From the AFL-CIO

Next up in our series that takes a deeper look at each of our affiliates is the National Association of Letter Carriers.

Name of Union: National Association of Letter Carriers (NALC)

Mission: To unite fraternally all city letter carriers employed by the U.S. Postal Service for their mutual benefit; to obtain and secure rights as employees of the USPS and to strive at all times to promote the safety and the welfare of every member; to strive for the constant improvement of the Postal Service; and for other purposes. NALC is a single-craft union and is the sole collective-bargaining agent for city letter carriers.

Current Leadership of Union: Fredric V. Rolando serves as president of NALC, after being sworn in as the union's 18th president in 2009. Rolando began his career as a letter carrier in 1978 in South Miami before moving to Sarasota in 1984. He was elected president of Branch 2148 in 1988 and served in that role until 1999. In the ensuing years, he worked in various roles for NALC before winning his election as a national officer in 2002, when he was elected director of city delivery. In 2006, he won election as executive vice president. Rolando was re-elected as NALC president in 2010, 2014 and 2018.

Brian Renfroe serves as executive vice president, Lew Drass as vice president, Nicole Rhine as secretary-treasurer, Paul Barner as assistant secretary-treasurer, Christopher Jackson as director of city delivery, Manuel L. Peralta Jr. as director of safety and health, Dan Toth as director of retired members, Stephanie Stewart as director of the Health Benefit Plan and James W. “Jim” Yates as director of life insurance.

Number of Members: 291,000 active and retired letter carriers.

Members Work As: City letter carriers.

Industries Represented: The United States Postal Service.

History: In 1794, the first letter carriers were appointed by Congress as the implementation of the new U.S. Constitution was being put into effect. By the time of the Civil War, free delivery of city mail was established and letter carriers successfully concluded a campaign for the eight-hour workday in 1888. The next year, letter carriers came together in Milwaukee and the National Association of Letter Carriers was formed.

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There is Dignity in All Work

There is Dignity in All Work