Lies My Uncle Milty Told Me
I have long been an advocate of lowering corporate taxes. They represent a somewhat necessary but largely regressive tax, simply generating only a fraction of the intended income for government coffers when compared to the money lost to the GNP. By the same token, drastic reductions in corporate tax rates, not tied, at least in part, to increased wages, negate most of the potential benefit to the overall economy. All too predictably, drastic decreases in the corporate tax rate have always led to corporations buying up their own stock, increasing dividends and inappropriate executive bonuses. Perhaps, in a one time mini “bonanza,” the government might recoup a relatively modest amount of money from corporations luring a few businesses back to the U.S., but these gains are basically offset by the overly drastic lowering of the corporate tax rate.
By the same token, lowering corporate tax rates by 10 percentage points (35% to 25%), a rate change with at least the potential to lower our national debt, companies could have been required to raise wages a prescribed amount in order to further qualify for the 20% tax rate goal of Republican lawmakers. The result, with most workers spending almost every penny they earn, could boost both our GNP and the actual amount that the government collects in income tax, even if income tax rates were legitimately lowered for the average worker. Paying more taxes because you’re earning more isn’t nearly as annoying as effectively earning the same wages year after year with less and less buying power. This is Basic Pre-Economics 101. The embarrassing question is why did neither party entertain these ideas in their “debates” in Congress?
We know that in his campaign and early presidency President Obama introduced the idea of lowering corporate taxes to a reasonable level, about 25%. Were extremist Democrats so overwhelmed with animosity toward corporations that they were willing to jeopardize our economy? Or, were they so caught up in social issues that the effect of corporate success and its benefit to the economy just skipped their minds? Consider that it took Bernie Sanders more than 10 years to finally realize that to “market” a legitimate single payer system, it is necessary to show how many trillions (with a “t”) such a system could save corporations and small businesses, savings they could pour back into the economy, into higher wages and the production of goods at lower costs.
Meanwhile, Republicans, when their turn came, with their greediest and most impatient donors literally frothing at the mouth in anticipation of sudden inordinate increases in wealth and threatening to withhold donations, clearly bowed to the pressure, refusing to negotiate with moderate Democrats and even many of their own party members regarding a tax package. Ironically, Republicans violated their own principles by actively increasing the national debt when they purposely far overshot the 25% corporate tax goal with no increase in wages. Not only did they raise the national debt, but they mlsled the average taxpayer by withholding the actual tax cuts promised to the middle class and substituting temporary “virtual” cuts in their stead.
So, as usual, Republicans managed to repeat the lies of their fellow neo-psychotic, Uncle Milty Friedman, claiming that the average worker will automatically reap huge magical benefits from massive amounts of hard earned tax money set aside for blatant corporate welfare. It’s still the same “magic,” the sleight of hand that George Herbert Walker Bush called “Voodoo Economics,” but we may as well call it what it really is: The Free Money System.*
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* It might be legitimately argued that this is the classic model for the Republican “Free Money System” while the Democratic version “wastes” excessive amounts on too many people who should actually be working. If you believe that a Congress full of dysfunctional men and women are responsible for both versions, you are probably wrong. It is the campaign finance system that creates and mandates the dysfunction, a system which cannot be blamed on the decisions of “conservative” vs. “liberal” Supreme Court Justices, but rather on an “immoral” decision by the “conservative” justices who happened to be on the Court at the time of the current campaign finance system’s approval.
Allen Finkelstein, 6/17/18