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

Failing Bridges Hold Public Hostage

From the USW

From tumbledown bridges to decrepit roads and failing water systems, crumbling infrastructure undermines America’s safety and prosperity. In coming weeks, Union Matters will delve into this neglect and the urgent need for a rebuilding campaign that creates jobs, fuels economic growth and revitalizes communities.

The Seattle Department of Transportation (SDOT) gave the public just a few hours’ notice before closing a major bridge in March, citing significant safety concerns.

The West Seattle Bridge functioned as an essential component of  the city’s local and regional transportation network, carrying 125,000 travelers a day while serving Seattle’s critical maritime and freight industries. Closing it was a huge blow to the city and its citizens. 

Yet neither Seattle’s struggle with bridge maintenance nor the inconvenience now facing the city’s motorists is unusual. Decades of neglect left bridges across the country crumbling or near collapse, requiring a massive investment to keep traffic flowing safely.

When they opened it in 1984, officials predicted the West Seattle Bridge would last 75 years.

But in 2013, cracks started appearing in the center span’s box girders, the main horizontal support beams below the roadway. These cracks spread 2 feet in a little more than two weeks, prompting the bridge’s closure.

And it’s still at risk of falling.  

The city set up an emergency alert system so those in the “fall zone” could be quickly evacuated if the bridge deteriorates to the point of collapse.

More than one-third of U.S. bridges similarly need repair work or replacement, a reminder of America’s urgent need to invest in long-ignored infrastructure.

Fixing or replacing America’s bridges wouldn’t just keep Americans moving. It would also provide millions of family-supporting jobs for steel and cement workers, while also boosting the building trades and other industries.

With bridges across the country close to failure and millions unemployed, America needs a major infrastructure campaign now more than ever.

 

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There is Dignity in All Work

There is Dignity in All Work