Republicans claim their tax cut has turned the economy around. They say we are in an economic boom. But the bottom half of our society has not made economic progress for a half century, and the Trump tax plan hasn’t fixed anything – rather it has siphoned more wealth up to the wealthiest Americans. Yes, some statistics have improved; but they have been improving since the 2008 crisis. Remember, that crisis ended with government subsidies. The subsidy for A.I.G. alone was more than the total welfare budget for the previous 15 years.
Consider these realities.
- The tax rate for the wealthiest Americans remains about half what they paid in 1981.
- The tax plan penalized New Jersey, New York, and other states by limiting the state and local tax (SALT) deduction. This meant that at least 11% of New Jersey had to pay higher taxes.
- The poorest Americans have a 10% tax rate. There were no taxes on income of $3400 or less until 1985. Exempting the lower income brackets from taxes would be a huge economic stimulus because they would spend anything they didn’t pay, having virtually no disposable income.
- A lower percentage of the overall population is working.
- Labor force participation is down to a level not seen for at least 30 years.
- Poverty still exceeds the 11.3 percent rate of year 2000.
- People living on income from savings had no income last year and had to dip into their principal.
- Job growth since Trump took office is about the same as the last two years of Obama.
Even the Chairman of the Federal Reserve admitted that “The benefits of this strong economy and sound financial system have not reached all Americans.” (Washington Post 12/13/18.) The article continues, “Four in 10 adults still say they don’t have enough savings to cover a $400 emergency expense….[although] in 2000, nearly 92 percent of men of prime age had jobs or were actively searching for work.”
As for the Trump’s predicted stimulus, “Many corporations made good on promises to raise wages and pay bonuses. But others announced layoffs, even as the $1.5 trillion tax cut added billions to their bottom lines…. Analysts noted that the handouts to workers amounted to a relatively small share of the roughly $200 billion in federal income taxes that corporations avoided thanks to the cuts…. After-tax corporate profits are growing nearly 10 percent faster than profits before taxes, a historically unusual gap that was opened by the Trump tax cuts. Typically, such gaps appear only around recessions.” (NY Times 12/27/2018)
“Steven Rattner, among the most sober and least partisan economists, reminds us … ‘The problem with Mr. Trump’s victory lap is that job growth during his administration has been slightly slower than it was during the last 22 months of Mr. Obama’s tenure: 4.2 million Americans hired under Mr. Trump versus 4.8 million under Mr. Obama.’” (Washington Post 1/2/19)
The recovery from 2008 is far from complete. The only thing booming is corporate profits. The “trickle down” rhetoric that began with Ronald Reagan doesn’t work. While Reagan was cutting the 70% top tax bracket down to 28%, he was also raising taxes for the lowest tax bracket to 15% on any income. Since Reagan earnings for half of us have stayed flat or declined while the tax rate for the wealthiest has never risen above 40%. Republicans whine about Democrat attempts to “redistribute without merit;” while they legislated a massive redistribution to the rich. This redistribution has gone beyond tax cuts. The wage gap between the average working American and CEOs has grown from 50 to 1 in 1970 to about 750 to 1. Why? Where’s the merit?
Most politicians have bought into the idea that traditional thinking about supply and demand is wrong. “We have to stimulate the supply side.” But you can’t sell things when nobody is buying. The tax cuts were supposed to fix market failures allegedly caused by excessive taxation and other government “interventions.” The word free in the rhetoric of market fundamentalism – free markets and free trade – fooled many into forgetting that they never have existed and cannot exist. Orderly markets and trade are completely dependent on governments to set rules of the game. There has never been a major economic success where government did not play a major role. Furthermore, markets work best when private and social returns are aligned. It seems that the 1% have forgotten that their fates are bound to the rest of us. They must pay their fair share.
References: articles, tax rates, unemployment, workforce participation, earning power, poverty rates and income inequality – https://waynenjdems.org/taxes-the-economy-reference-material/