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Reich’s 7 Reasons

Notable leftist who calls himself an economist Robert Reich has a list of “7 Reasons Why Trump’s Corporate Tax Cut is Completely Nuts.” Here’s his 7, with my responses under each one in italic:

1. Profitable U.S. corporations already pay on average of only 14% according to the Government Accountability Office. That’s less than a lot of middle-class families pay. (And that’s less than half the official 35% corporate tax rate.) What’s more, some giant corporations pay little (if any) U.S. taxes because of loopholes or because they shift their profits offshore to tax havens.

Good. They should pay even less than 14%. If he’s worried that this is less than middle-class families, then he should know I also wish to slash middle class families’ tax burden. If the government continues to threaten to steal from them via taxation, it makes sense they they are going to continue hiding their money overseas. I too hide my wealth from thieves.

2. Trump’s corporate tax cut will bust the federal budget. The nonpartisan Tax Policy Center projects it will reduce federal revenue by $2.4 trillion over 10 years. This will either require huge cuts in services for all of us, or additional taxes paid by us to pick up the corporate tab.

False, a tax cut cannot bust a budget. The only thing that can bust a budget is stubbornly continuing to spend more than is brought in. We should slash all “services” on the basis that they are either completely unnecessary or will otherwise be provided by the market.

3. It’s based on supply-side, trickle-down nonsense. The White House says the tax cuts will create a jump in economic growth that will generate enough new revenue to wipe out any increase in the budget deficit. Rubbish. Ronald Reagan and George W. Bush both cut taxes mostly for the rich, and both ended their presidencies with huge budget deficits.

One of the myths promoted by the leftist critics of supply side economics is that Art Laffer was promising that all cuts in taxes will generate enough new revenue to replace it. This is false. This doesn’t mean the supply siders were perfect, far from it– they will still trying to find ways for the government to acquire more revenue more efficiently. But in any case, the cited Presidents ended with huge deficits because they didn’t cut spending. This is the fault of their spending habits, not their tax cuts.

4. It will create a new special loophole for hedge fund managers, big law firms and real estate moguls like Donald Trump. They could slash the  tax rate they pay on their business income from 40 percent to 15 percent. 15 percent is what a middle-class person pays. Do you think people like Trump should pay a tax rate that someone making $60,000 a year pays?

Good. We need more loopholes. I propose that we double down on loopholes until the tax code is one giant loophole. Per his question: yes I do think that. They should all pay zero.

5. It creates an international race-to-the-bottom on corporate tax rates that the U.S. cannot possibly win.One of its supposed attractions is it makes U.S. corporate taxes more “competitive” internationally. But we can’t match the rates in tax havens, which are often ZERO. And other countries will just lower their taxes in response. That’s what happened after 1986, the last time the U.S. cut corporate tax rates.

I love races to the bottom when it comes to taxes. Perhaps the US can’t win. This is because the institution of the State is strong in the United States and we have too many crummy politicians trying to make the world a better place with policy and legislation. We should aim to match the tax rates at zero.

6. American corporations don’t need a tax cut to be competitive. They’re already hugely competitive as measured by their profits – which are near record highs– while the share of taxes they pay are at record lows. Corporations should be doing more to pay their fair share, not getting a giant tax cut!

The goal is not to be “competitive.” If every country steals 95% of their citizens’ wealth, there’s no moral bragging point in being competitive in that one country only steals 95%. Corporations pay their fair share by providing goods and services on the market that people willingly pay for. They need more tax cuts to reward this behavior.

7. Corporations won’t use the extra profits they get from the tax cut to invest in more capacity and jobs.That’s the White House line, but it’s baloney.  Corporations are now using a large portion of their profits to pay their CEOs’ hefty pay packages and to buy other companies in order to raise their stock prices. There’s no reason to suppose they’ll do any different even with more profits.

Part of this point is may be true, but the problem is rooted in the corruption of finance due to the Federal Reserve and its destruction of our economy’s capital reserves. But there’s also nothing economically harmful about buying other companies– this is investing in the growth of the business and is aimed at increased business efficiency and productivity. 

Published in C.Jay Engel

  • Timothy Muhindi Mwangi

    I love the analysis. All the way from Kenya.

  • Timothy Muhindi Mwangi

    Do people talk here? Or are there hierarchies that I am not informed of? Maybe some signature will do…