A windfall for giant
corporations
By
Phil Mattera for the Dirt Diggers Digest
We
now know who it was Donald Trump was really addressing in his convention speech
last summer when he declared “I am your voice”: the Forbes 400 and others in
the upper reaches of the 1 Percent.
The
one-page tax outline just released by the Trump Administration — with its
pass-through scheme, its radical reduction in statutory corporate tax rates,
and its elimination of the alternative minimum tax, the estate tax and taxation
of overseas business profits — provides an unrestrained windfall for Trump’s
own billionaire class.
In
defiance of all evidence, Treasury Secretary Mnuchin is insisting that this is
not a giveaway to the rich but instead is “all about jobs, jobs, jobs.”
This
is the same official who, harking back to the snake oil of the Reagan
Administration, insists that the tax cuts will “pay for themselves.”
The
claim that the corporate tax cuts will boost the economy and job creation is
based on the widely promoted but largely baseless claim that U.S. business is
burdened with excessively high rates.
As groups such as the Institute on Taxation and Economic Policy have repeatedly shown over the years and which ITEP documents once again in a recent report, many large corporations pay effective tax rates far below the 35 percent statutory rate. And through the aggressive use of tax avoidance techniques, quite a few of those manage to bring their effective rate down to zero or less.
Even
if one accepts the questionable connection between taxes and job creation,
Trump’s proposal would have no effect on employment in sectors such as
utilities, industrial machinery, telecommunications and oil & gas, which
ITEP shows are already paying effective rates below 15 percent.
There
are sectors currently paying rates well above 15 percent, but it is not clear
that lower taxes would do much to create jobs — and even less so, good jobs.
One
of the highest effective rates can be found in the retail sector, which despite
this supposed burden, has over the year added millions of jobs.
Unfortunately,
most of those positions are substandard. The typical retail wage is about a
third lower than the average for the private sector as a whole.
Recently,
retail employment has been falling, but this has nothing to do with taxes; it’s
the result of the increasing number of people buying stuff online rather than
from brick-and-mortar stores.
Giving
big tax cuts to Wal-Mart and Dollar General will not reverse the job loss nor
will it improve the wages of their remaining workers.
It’s
also unclear what benefits will come from reducing taxes on health care
companies, which also pay effective rates close to the statutory level.
Taxes
have not stood in the way of massive employment growth in this sector, which on
the whole pays better than retail but has a substantial number of low-wage
jobs. The future of this sector depends not on taxes but instead on whether
Trump and Congressional Republicans succeed in dismantling the Affordable Care
Act.
Another
part of the Trump outline that will do little to create good jobs is the call
for the repatriation and light taxation of foreign profits that corporations
have been parking overseas.
Business
apologists have long made extravagant claims for this policy, but previous
experiments with
repatriation holidays did not boost jobs or even investment and instead simply
fattened profits and dividends.
Those
who put together the Trump tax outline are either oblivious to the discussion
in recent years about growing income and wealth inequality or they deliberately
set out to make the problem much worse. In either event, the plutocrats are
rejoicing.