By GENE H. McINTYRE
Americans of modest financial means may want to withhold their cheers over President Trump’s latest declaration, the one where he wants to reduce the corporate tax rate from 35 to 15 percent. It’s an urban myth that a former U.S. president said, “What’s good for General Motor is good for America,” but it just as well be ascribed to President Trump as he, personally, and his wealthy pals, are those who enthusiastically greet this plan and will benefit from it.
But look at the facts in this latest of issues to hit the fan: Trump and company argue that the additional money going into the coffers of U.S. corporations would free up valuable cash for them. Then, these companies could use the money to increase their investments, increase employees’ pay and earnings, accelerate corporate hiring and move the economy into greater growth. Additionally, it’s argued by Trump, corporations that now deposit trillions overseas to keep from paying U.S. taxes would bring the money home and thereby compete better with rivals from countries with lower tax rates.
Meanwhile, American economists, tax experts and business owners believe that this tax adjustment is unlikely to doubtful to fulfill what Trump promises. Here are some reasons: (1) Preferring not to hire additional employees, companies may use much of their savings to buy back their stock or simply increase dividends to their wealthy investorsl. Many companies have already been able to borrow money at very low rates in order to grow but have not been inclined to add employees; and (2) Corporate tax cuts will provide small overall benefits because the general health of the current American economy is low unemployment at 4.4 percent and remains in a slow steady upward turn where big tax cuts would deliver nothing or next to it.
Two examples from recent corporate tax cuts serve to inform. The state of Kansas, in 2012, exempted thousands of its businesses from corporate taxes and cut individual rates but then faced a devastating revenue shortfall with an anticipated growth that didn’t happen, all resulting in public services, including education at all levels, realizing destructive consequences. The Bush administration provided a tax “holiday” in 2004 in hope of bringing profits back to America but later discovered that tax revenues declined while U.S. companies stashed their cash overseas in wait to receive a tax discount.
Currently, those savvy in this matter, including the non-partisan Tax Policy Center, comments that what will happen regarding the Trump plan is that the federal deficit will swell like a bumblebee sting. Those folks tell us that even if all tax breaks were eliminated, the corporate rate could not drop below 26 percent without sending the deficit further into the stratosphere.
Of course, one of Trump’s chief advisors is a guy who’s ensconced in the White House. Gary Cohn, very rich, argues for the big corporate tax reduction. He says small businesses would especially benefit. His point is that planned tax cuts on profits would “double” owners’ personal income and free them to hire more employees. Full of misinformation, the Cohn doctrine assumes business owners want to increase their payroll rather than enjoy higher profits and personal income.
The ever-shrinking number of Americans still receiving their income from traditional “defined benefit” pensions do not, by the way, receive more money if the stock market rises. And, any argument that proposes corporate tax cuts are a path to benefit the American worker or retiree is now and has always been proven to be the sink hole of the “trickle-down” promise to every U.S. worker myth and the old lump of coal in what’s tried-to-be-sold as a Christmas bonus.
(Gene H. McIntyre lives in Keizer.)