I have been hearing about the new Republican tax plan that is taking shape, which, as usual, disproportionately benefits the very wealthy and businesses.[1] One stated strategy to help ordinary Americans is to slash corporate taxes. As Senator John Thune (R-SD) explained on NPR, the thinking is that as businesses reap a tax windfall, they will use that money to hire more workers and raise existing wages.
Here's the thing: Republicans damn well know a business' sole priority is to increase shareholder value, which is achieved by maximizing profit. It should be obvious by now that wages are an expense that businesses will ruthlessly seek to minimize. Wages are not low because businesses don't have enough money to raise them; 2017 corporate profits are at record levels.[2] Businesses will always find the lowest possible wage floor possible, no matter how well they're doing. That's capitalism. It's not rocket science.
This economic policy, based on the tax theory of supply-side economics, relies on a dynamic known as the Laffer Curve, which states that every dollar in tax-reduction equates to an additional dollar recouped through economic growth, which expands the government tax base. This theory, like most naïve economic models, falls into the total bullshit category once you put it out in the real world and test its assumptions. And it's even more dubious how well its assumptions hold when the policy is applied to corporate tax policy.
To date, we have seen that supply-side economics has limited effect if the economy is already doing ok, and actually has harmful effects if government spending isn't correspondingly constrained, as it invariably results in ballooning budget deficits, which ends up dampening growth in the long term.[3] This part, unfortunately, isn't theory, we've seen it a few times now and are still suffering the consequences of Republican fiscal irresponsibility.
If Republicans are serious about the stimulating effects of supply-side theory, they should target the tax cuts primarily at the personal income taxes of the lower and middle-class, where they will have the highest impact instead of giving them to the rich, who are... already rich. Giving billionaires a few extra hundred million isn't going to raise wages for the rest of us. All that does is simply increase the already disastrous income inequality here in the United States,[4] which is ultimately a destablizing societal force.
As the prominent conservative Robert Novak once said, Republicans believe that "God put the Republican Party on earth to cut taxes. If they don't do that, they have no useful function."[5] Seriously? What a pathetic mission. While this may have had some purpose somewhere in Reagan's America of the early-80's, when the marginal tax rate was very high, these are very different times now. Given the serious challenges we face as a nation, we need a Republican party with some substantive vision, and some genuine moral principles that stand for something beyond the bankrupt kleptocratic dystopia they have created for us today.
At the end of the day, their public service should be about creating a country where we and our children can dream and thrive, no matter our level of wealth, our color or religion. If not that, what on earth are they doing it for?