Click amount to donate direct to CounterPunch
  • $25
  • $50
  • $100
  • $500
  • $other
  • use PayPal
Please Support CounterPunch’s Annual Fund Drive
We don’t run corporate ads. We don’t shake our readers down for money every month or every quarter like some other sites out there. We only ask you once a year, but when we ask we mean it. So, please, help as much as you can. We provide our site for free to all, but the bandwidth we pay to do so doesn’t come cheap. All contributions are tax-deductible.
FacebookTwitterGoogle+RedditEmail

Republican Tax Cuts: You’re Right, They’re Not About Economic Growth or Lifting Working-Class Incomes

Will average household incomes rise if Republican tax cuts become law? Not for long. Average cuts will be small and they won’t last. In the House version, the middle fifth of the households may see their after-tax income rise by 1.5% in 2018, but most of that increase will be gone by 2027. The richest 1% of households get a larger increase–2.5%–and they still be getting most of it in 2027.[1]

But won’t tax cuts for the rich and the corporations generate many more jobs and higher pay?  Probably not. There is no evidence that tax burdens on businesses and investors are the reason that job growth is not faster or that wages are never on the up-escalator for very long.

The purchasing power of an hour’s work for average employees increased 53% from 1950 through 1975. But wages took a U-turn in the 70s and they fell or stagnated in the 1980s. The latter occurred despite the fact that rich people were gifted with much more after-tax income in the Reagan era. Between 1980 and 1982 the top marginal tax rate was cut from 70% to 50%; from 1986 to 1988, it fell to 28%, the lowest level since 1931. The corporate tax rate was also slashed. Despite these incentives, average hourly pay fell 4% (1980-1990).[2]

Dropping individual tax rates for rich people does not lift average Americans. Neither does cutting corporate taxes, as long as there is a plentiful supply of jobless workers and few strong unions. Don’t expect a jump in real business investment when many companies already have more money than they know what to do with. How much more stuff can they sell if household incomes don’t increase substantially? [3]

But I am engaging in a fact-based discussion of economic policy and social justice. That’s not what Republican promises are all about. The new tax cuts may add a little lift to the economy as government revenues don’t grow as fast as spending–it’s Keynesian deficit spending, and Republicans do it all the time–but it’s unlikely that there will be much of a boost in real wages. Higher pay for workers has never been a Republican goal, and quite a few Democrats don’t worry much about it either.

But Republicans are in charge and if they really cared about workers, they could raise the federal minimum wage to $15 start infrastructure programs today. They might actually help unemployed left-behinds in Ohio, West Virginia, Detroit, and Chicago. And they’d win Democratic support on both issues. But die-hard Republicans aren’t interested in good-jobs policies or cooperation across the aisle. Many Republicans, and especially the Tea-Party/Freedom Caucus in the House, have a gimme world-view that elevates the capitalist ethic of greed into a moral code. They’re for YOYO (You’re On Your Own),  not WITT (We’re In This Together).

If a right-wing House Republican leader were talking privately to his colleagues in an honest and realistic way, it might sound like this:

“Just among ourselves–doing things to create more jobs and more income for the lower half–that’s not important. Talking about it is good, but I haven’t even thought deeply about it. We are doing the tax cuts to reward corporations and our big donors; we need their money–that’s politics. But we also have idealistic motives–our own moral theory. Affluent and rich Americans deserve everything they can get their hands on, regardless of how they do it and how many jobs they kill. They work hard amassing wealth. Sometimes they create a lot of jobs; sometimes they get rich by destroying jobs. Sometimes they make money by employing lawyers and lobbyists to evade taxes and rig legislation. Hey, that’s life; more power to them. And it’s good that their kids start out way ahead of John and Jane Doe’s kids. The kids will have more of a head start when we get rid of the Estate Tax. And why not? These are obviously people of good stock.

“Think of it this way. We are cutting government to boost Social Darwinism. That’s the struggle that lifts everyone…well, everyone who has what it takes. The federal government is 90% burden. We know it never creates jobs. Market competition is what makes America great. American was greater in the 1800s when the Robber Barons and their servants could tell the truth about defective workers and did not have to be dainty about crushing worker rebellions. We need more of that. Selfishness is good. You should all read Ayn Rand’s Atlas Shrugged. It was published in the 1950s but it is still relevant. However, it’s longer than our tax bill. If you are too busy for Atlas, here’s a short variation that comes with God’s approval. In many public lectures he gave in the late 1800s, a man named Russell Conwell said this: a poor man is one ‘whom God has punished for his sins… remember that there is not a poor person in the United States who was not been made poor by his own shortcomings or the shortcomings of someone else. It is all wrong to be poor anyhow.’ Invigorating, right?  We need more of that today. Here’s a motto for us: Selfishness good. My money going to help average Americans bad.”

By the way, this statement may not be appropriate for all audiences.

Notes.

[1] On the House bill, Tax Policy Center, “Preliminary Distributional Analysis of the Tax Cuts and Jobs Act,” November 8, 2017, especially Figure 1. On the Senate proposal, check the graphic in David Leonhardt, “The G.O.P. Is Fooling Itself on Taxes,” New York Times, Sunday Review, November 19, 2017, 3.

[2] Wage information based on The Economic Report of the President, 2016, Table B-15.

[3]  Josh Bivens, “Real World Data Continue to Show No Link Between Corporate Cuts and Wage Increases,” from Economic Policy Institute, November 3, 2017, found at https://portside.org, November 12, 2017; and Eduardo Porter, “Tax Cuts, Sold as Fuel for Growth, Widen Gap Between Rich and Poor,” New York Times, October 3, 2017, accessed November 15, 2017, at nytimes.com.

More articles by:

Frank Stricker is in the National Jobs for All Coalition. He taught history and labor studies at CSUDH for thirty-five years. He has just written What Ails the American Worker? Unemployment and Rotten Jobs: History, Explanations, Remedies. For some sources behind this essay, e-mail frnkstricker@aol.com.

October 17, 2018
Patrick Cockburn
When Saudi Arabia’s Credibility is Damaged, So is America’s
John Steppling
Before the Law
Frank Stricker
Wages Rising? 
James McEnteer
Larry Summers Trips Out
Muhammad Othman
What You Can Do About the Saudi Atrocities in Yemen
Binoy Kampmark
Agents of Chaos: Trump, the Federal Reserve and Andrew Jackson
David N. Smith
George Orwell’s Message in a Bottle
Karen J. Greenberg
Justice Derailed: From Gitmo to Kavanaugh
John Feffer
Why is the Radical Right Still Winning?
Dan Corjescu
Green Tsunami in Bavaria?
Rohullah Naderi
Why Afghan Girls Are Out of School?
George Ochenski
You Have to Give Respect to Get Any, Mr. Trump
Cesar Chelala
Is China Winning the War for Africa?
Mel Gurtov
Getting Away with Murder
W. T. Whitney
Colombian Lawyer Diego Martinez Needs Solidarity Now
Dean Baker
Nothing to Brag About: Scott Walker’s Economic Record in Wisconsin:
October 16, 2018
Gregory Elich
Diplomatic Deadlock: Can U.S.-North Korea Diplomacy Survive Maximum Pressure?
Rob Seimetz
Talking About Death While In Decadence
Kent Paterson
Fifty Years of Mexican October
Robert Fantina
Trump, Iran and Sanctions
Greg Macdougall
Indigenous Suicide in Canada
Kenneth Surin
On Reading the Diaries of Tony Benn, Britain’s Greatest Labour Politician
Andrew Bacevich
Unsolicited Advice for an Undeclared Presidential Candidate: a Letter to Elizabeth Warren
Thomas Knapp
Facebook Meddles in the 2018 Midterm Elections
Muhammad Othman
Khashoggi and Demetracopoulos
Gerry Brown
Lies, Damn Lies & Statistics: How the US Weaponizes Them to Accuse  China of Debt Trap Diplomacy
Christian Ingo Lenz Dunker – Peter Lehman
The Brazilian Presidential Elections and “The Rules of The Game”
Robert Fisk
What a Forgotten Shipwreck in the Irish Sea Can Tell Us About Brexit
Martin Billheimer
Here Cochise Everywhere
David Swanson
Humanitarian Bombs
Dean Baker
The Federal Reserve is Not a Church
October 15, 2018
Rob Urie
Climate Crisis is Upon Us
Conn Hallinan
Syria’s Chessboard
Patrick Cockburn
The Saudi Atrocities in Yemen are a Worse Story Than the Disappearance of Jamal Khashoggi
Sheldon Richman
Trump’s Middle East Delusions Persist
Justin T. McPhee
Uberrima Fides? Witness K, East Timor and the Economy of Espionage
Tom Gill
Spain’s Left Turn?
Jeff Cohen
Few Democrats Offer Alternatives to War-Weary Voters
Dean Baker
Corporate Debt Scares
Gary Leupp
The Khashoggi Affair and and the Anti-Iran Axis
Russell Mokhiber
Sarah Chayes Calls on West Virginians to Write In No More Manchins
Clark T. Scott
Acclimated Behaviorisms
Kary Love
Evolution of Religion
Colin Todhunter
From GM Potatoes to Glyphosate: Regulatory Delinquency and Toxic Agriculture
Binoy Kampmark
Evacuating Nauru: Médecins Sans Frontières and Australia’s Refugee Dilemma
FacebookTwitterGoogle+RedditEmail