There was some good pushback on yesterday’s article on taxes. But sorry, I’m still right.
Many people responded with generic low-tax anti-government positions. Fine. Let’s say the government is definitely bad and taxes are definitely too high. The current tax bill is still not the right way to do tax cuts.
Budget director Mick Mulvaney claims that the richest 20% of people pay 95% of income tax; the Wall Street Journal‘s numbers are a little lower, at 84%. Total income taxes are $1.8 trillion, so the poorest 80%’s share comes out to somewhere between 90 and 280 billion. This is around the same order of magnitude as the $100 billion in tax cuts in the current GOP bill. So it looks like one alternative to this bill, no more or less costly, would be to halve income taxes for the bottom 80% of the population, maybe anyone making less than $100,000.
Is there any reason to prefer the existing GOP proposal to this one?
The only argument I can think of is that corporations are good because they make investments are hire employees and stimulate the economy. But…
First of all, the IGM Forum asked the nation’s top economists whether the current tax bill would substantially raise GDP. 51% said it wouldn’t, 36% said they weren’t sure, and only 2% (= 1 economist) thought it probably would.
Second, as Marxist and anti-corporate a site as Forbes notes that A Corporate Tax Cut Won’t Boost Economic Growth, because they went around and asked a lot of CEOs whether they were going to invest the tax cut in cool economic-growth boosting stuff, and the CEOs mostly said no, they would probably just increase shareholder dividends.
Third, for the past few decades there’s been a weird uncoupling between economic growth and the fortunes of most people in the developed world. I won’t insult your intelligence by re-posting the same graph you’ve seen a thousand times, but this isn’t subtle. If all the economists and all the CEOs are wrong, and we get a 3% boost in GDP over a decade or something, I expect when I open a holo-newspaper in 2027 it’ll be about how mysterious it is that average middle-class salaries are still pretty close to their 1970s level. I don’t think you have to be a communist to believe that economic growth that just goes to a tiny subsection of the population isn’t all that useful. You just have to be a utilitarian.
(I guess expanding the economy can also give us cool technology, but I would like rather less cool technology for a while, actually).
But most important, if all of this is wrong – if the CEOs are lying and really they’ll spend the money on investment, and the economists are wrong and really corporate investment will turbo-charge the economy, and the past few decades of economic history are wrong and some of the gains of a turbo-charged economy go to the poor and middle-class – then the good thing that happens is that poor and middle-class people have more money.
…which is the same thing that would have happened if you had just lowered the taxes on the poor and middle-class directly, you moron. It’s also what would happen if we spent it on welfare for the poor, on health care for the middle class. God help me, even Bernie’s free college tuition would save a couple people from student loan debt.
For the corporate tax cut to be a better idea, it would have to turbo charge the economy so dramatically that even after accounting for the low chance it will work at all, the amount taken off the top by executives and shareholders, and the poor ability of economic turbo-charging to ever reach the working class, it still puts more money in the hands of people who need it than just giving them the money would. I am not an economist and I don’t know as much about multipliers as I should, but I have not heard anyone seriously assert this.
Last week I criticized socialists who prefer funding complicated government programs that might eventually help poor people, to just giving poor people the money. I feel like this is the same sort of issue. Some sort of complicated scheme in which we make corporations much richer and hope this is good for the poor and middle-class in some way is a lot less certain than just giving poor and middle-class people more money.
Spending the tax money on social welfare programs would help give poor and middle-class people more money. Expanding the EITC would give poor and middle-class people more money. Cutting personal income taxes in lower brackets would give poor and middle-class people more money. This tax bill doesn’t do any of those things, and it costs the money that would make doing any of those things easier.
It’s sometimes unfair to compare real government programs to the most effective possible government program; everything fails by that measure. But this tax bill seems so much worse than even other tax cuts that I think it’s fair to judge it as a tremendous opportunity cost.