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.

July 16, 2018
Sheldon Richman
Trump Turns to Gaza as Middle East Deal of the Century Collapses
Charles Pierson
Kirstjen Nielsen Just Wants to Protect You
Brett Wilkins
The Lydda Death March and the Israeli State of Denial
Patrick Cockburn
Trump Knows That the US Can Exercise More Power in a UK Weakened by Brexit
Robert Fisk
The Fisherman of Sarajevo Told Tales Past Wars and Wars to Come
Gary Leupp
When Did Russia Become an Adversary?
Uri Avnery
“Not Enough!”
Dave Lindorff
Undermining Trump-Putin Summit Means Promoting War
Manuel E. Yepe
World Trade War Has Begun
Binoy Kampmark
Trump Stomps Britain
Wim Laven
The Best Deals are the Deals that Develop Peace
Kary Love
Can We Learn from Heinrich Himmler’s Daughter? Should We?
Jeffrey St. Clair
Franklin Lamb, Requiescat in Pace
Weekend Edition
July 13, 2018
Friday - Sunday
Brian Cloughley
Lessons That Should Have Been Learned From NATO’s Destruction of Libya
Paul Street
Time to Stop Playing “Simon Says” with James Madison and Alexander Hamilton
Jeffrey St. Clair
Roaming Charges: In the Land of Formula and Honey
Aidan O'Brien
Ireland’s Intellectuals Bow to the Queen of Chaos 
Michael Collins
The Affirmative Action Silo
Andrew Levine
Tipping Points
Geoff Dutton
Fair and Balanced Opinion at the New York Times
Ajamu Baraka
Cultural and Ideological Struggle in the US: a Final Comment on Ocasio-Cortez
David Rosen
The New McCarthyism: Is the Electric Chair Next for the Left?
Ken Levy
The McConnell Rule: Nasty, Brutish, and Unconstitutional
George Wuerthner
The Awful Truth About the Hammonds
Robert Fisk
Will Those Killed by NATO 19 Years Ago in Serbia Ever Get Justice?
Robert Hunziker
Three Climatic Monsters with Asteroid Impact
Ramzy Baroud
Europe’s Iron Curtain: The Refugee Crisis is about to Worsen
Nick Pemberton
A Letter For Scarlett JoManDaughter
Marilyn Garson
Netanyahu’s War on Transcendence 
Patrick Cockburn
Is ISIS About to Lose Its Last Stronghold in Syria?
Joseph Grosso
The Invisible Class: Workers in America
Kim Ives
Haiti’s Popular Uprising Calls for President Jovenel Moïse’s Removal
John Carroll Md
Dispatch From Haiti: Trump and Breastfeeding
Alycee Lane
On Heat Waves and Climate Resistance
Ed Meek
Dershowitz the Sophist
Howard Lisnoff
Liberal Massachusetts and Recreational Marijuana
Ike Nahem
Trump, Trade Wars, and the Class Struggle
Olivia Alperstein
Kavanaugh and the Supremes: It’s About Much More Than Abortion
Manuel E. Yepe
Korea After the Handshake
Robert Kosuth
Militarized Nationalism: Pernicious and Pervasive
Binoy Kampmark
Soft Brexits and Hard Realities: The Tory Revolt
Helena Norberg-Hodge
Localization: a Strategic Alternative to Globalized Authoritarianism
Kevin Zeese - Nils McCune
Correcting The Record: What Is Really Happening In Nicaragua?
Chris Wright
The American Oligarchy: A Review
Kweli Nzito
Imperial Gangster Nations: Peddling “Democracy” and Other Goodies to the Untutored
FacebookTwitterGoogle+RedditEmail