U.S. tax cuts won’t trickle down to workers
Canada must not buy into any push for us to follow suit
As long as there is meaningful economic inequality, there will always be demand for rhetoric to justify the concentration of wealth.
But just because there’s always some attempt to justify further privilege for the rich doesn’t mean such an argument can claim any basis in fact. And the discussion of top-heavy tax legislation in the U.S. offers a reminder of the gap between trickle-down theory and reality — as well as a warning to Canada in how to respond.
Having failed in an attempt to directly attack health insurance, the Trump administration and its Republican allies in Congress are now focused primarily on a tax scheme which would combine huge giveaways to the wealthy with increased taxes and decreased benefits for the less well-off. And there’s a real possibility a bill will pass due to the Republicans’ perceived need to appease the billionaire donors who have been funding politicians and lobby groups solely to distort public policy in their favour.
Of course, few Republicans are willing to admit that’s the motivation behind the legislation.
Proponents of Trump’s corporate tax cuts are trying to justify the loss of trillions in tax revenue with claims that free money for business will pay for itself. But while that position is finding plenty of willing mouthpieces among politicians and lobbyists, it’s finding no support in evidence — while credible economic models suggest that any nominal economic growth would be eaten up by dividends sent offshore or profits used for unproductive share buybacks.
Indeed, even those who stand to benefit most from preferential treatment know better than to put their own skin in the game.
When Donald Trump’s top economic adviser Gary Cohn met with a group of corporate executives, he asked them to commit to additional investment in their businesses if a tax cut passed — fully expecting them to at least play along with the claim for their own benefit. But only a few were willing even to raise a hand to back up the theory behind a trillion-dollar giveaway. And that should tell us all we need to know about whether any actual cuts would be reflected in corporate spending.
A more substantial test of cause and effect then produced even more stark results. In response to the Trump administration’s laughable claim that corporate tax cuts would result in thousands of dollars a year in increased pay for workers, the Communications Workers of America challenged companies to commit that their gains from lower tax rates would be translated into higher wages. Not surprisingly, they didn’t find a single taker.
Unfortunately, the Republicans seem to be sufficiently detached from reality to raise a real risk that some type of bill will pass. But we can avoid being suckered into following suit.
Any talk of lower rates south of the border inevitably leads to claims that we need to follow our neighbours off the cliff in the name of competitiveness.
On that front, another recent study examined the effect of U.S. state tax rates on high-income individuals to test the threat that higher tax rates result in an exodus of wealthy people. Cristobal Young not only found a dearth of evidence to support that claim, but determined that wealthy people are less likely than middle-class or poor people to change their state of residence.
We may not be able to prevent the U.S. from buying another dose of supply-side snake oil. But we shouldn’t let either its actions or our own bought-and-paid-for corporate voices drag us into doing the same. Greg Fingas is a Regina lawyer, blogger and freelance political commentator who has written about provincial and national issues from a progressive NDP perspective since 2005.
Any talk of lower rates south of the border inevitably leads to claims that we need to follow our neighbours off the cliff in the name of competitiveness.