I had hope for Trump’s presidency because he promised vast improvements in our infrastructure. I knew that the GOP would block such spending, citing deficits, if a Democrat had been elected, but I thought that perhaps a Republican president could get Republicans to maintain and improve many needed things around the country. That, of course, has not happened. Instead we got more tax cuts and ludicrous promises. We were told that the tax cuts would benefit the middle class more than the rich. False. We were told that tax cuts would pay for themselves because they would turbocharge the economy, windfalling tax receipts. Independent analysts said that would not happen. The Congressional Budget Office said that even with a better economy, tax cuts would add $1.9 trillion to the deficits. Even so, conservatives ignored these expert opinions and maintained that tax cuts would pay for themselves. Instead, deficits are up by nearly 40% over pre-tax-cut days. The conservatives eschewed learning from experience; the deficit increased after Reagan’s tax cuts of 1980s and George W. Bush’s of 2000. This was also true in Kansas when that state slashed taxes a few years ago.
The Trump tax cuts were also supported by arguments that they would lead to increased capital spending by corporations and this would lead to jobs. This, too, was a surprising argument because even before the tax cuts, corporations had been making large profits. They already were sitting on bundles of cash. If they weren’t making capital investments, it was not for the lack of money. Not surprisingly, the tax cuts have not led to a surge in corporate capital expenditures. But now income inequality is greater now than ever recorded before in this country.
Perhaps a trip chasing waterfalls to Mt. Morris and Letchworth State Park is more than just an opportunity to see natural wonders and paintings done several generations ago. Perhaps it was also to be a lesson that the government can improve this country in temporary and lasting ways that might be better than reducing taxes. Our bridges and roads need work. Our broadband needs expansion. Our energy grid is frightening. Our elections need security. If these needed things can’t be done because they will lead to deficits, then perhaps we should think about the wisdom of our tax cuts.
And a recent column about a new book, Triumph of Injustice, by Emmanuel Saez and Gabriel Zucman, professors at Berkeley, reveals something more that is shocking about our tax system. Now the four hundred richest families in this country pay a combined federal, state, and local tax rate lower than any other income group. (See: https://www.nytimes.com/interactive/2019/10/06/opinion/income-tax-rate-wealthy.html) The overall tax rate for this group is only 23 percent. The first half of the twentieth century saw increasingly progressive taxes, and the overall tax rate on the wealthiest Americans was seventy percent in 1950. Since then we have increasingly cut taxes on the rich. Their overall tax rate was forty-seven percent in 1980 and is now half that. The pitch for slashing taxes on the rich has almost always been that the economy as a whole will benefit and everybody will be much better off. (Of course, those who advocate slashing taxes on the wealthy don’t call them rich people. Instead other terms are used, such as “job-creators.”)
The rationale has been hogwash. David Leonhardt, the columnist, states, “The wealthy, and only the wealthy, have done fantastically well over the last decades. G.D.P. growth has been disappointing, and middle-class income growth even worse.” As was true in the years before the Great Depression and now, “The American economy just doesn’t function very well when tax rates on the rich are low and inequality is sky high. . . . Which means that raising high-end taxes isn’t about punishing the rich (who, by the way, will still be rich). It’s about creating an economy that works better for the vast majority of Americans.”
(continued October 21)