Coming off their defeated attempt to repeal and replace ObamaCare, Trump and Republicans are now turning to the “massive” tax cuts he promised throughout the campaign. For decades, Republicans have been making tantalizing promises that tax cuts will increase your wealth. This time is no different. Except now you can be armed with research that the Republicans sponsored, which proves their tax plans are disastrous. That must be why they censored the report right after it came out.
The Trump tax cuts, in one graph
“We will provide massive tax relief for the middle class,” Trump told the Joint Session of Congress on Feb 28. That term, “massive” tax relief, was one of the hallmarks of his campaign. Who wouldn’t slobber like Pavlov’s dogs after hearing that 1,000 times?
After the election, Howmuch.net put together the following infographic on how his proposed plan will affect Americans.
As you can see, there are winners are losers. For most Americans, our taxes will change so little it almost won’t even matter. That’s because almost all Americans fall in the 25% bracket or below:
So who really gets the massive tax relief? The top two tax brackets (35% and 40%), who together account for 0.8% of American tax filings.
Tax cuts for the wealthy stimulate the economy and grow everyone’s wealth?
That has been the Republican party line on economics for the last three decades. The argument is that if you lower taxes on the rich, they will inject that money productively back into the economy. It is a marvelous bedtime story:
Once upon a time, Dick and Jane’s tax rate dropped 7%, so they kept an extra $100 million that year. They used that to stimulate the economy! She went to Bed, Bath & Beyond and Home Depot and the local tailor and bought so many consumer goods that those companies made extra money and gave everyone raises. They even hired more employees! Then Dick decided to use that money to open his own business, and even more people were hired. Thanks to a country full of Janes and Dicks, money trickled down and everyone got to drink from it.
Liberals and moderates have been countering for just as long that what really happens is quite different. All the Janes buy super-expensive ultra-high-end products (mostly foreign) that only make a couple other people any extra money, and the Dicks hoard the rest away so they can become even richer Dicks and Janes.
The evidence has never really supported the Republican claims, but how many average Americans want to look at graphs like these and then talk about them with their friends?:
This shows that as the top tax rates (red) have dropped, so has the growth of the gross domestic product (GDP, blue line). In other words, lowering taxes on the rich slows the economy. Like we said, it isn’t really fodder for banter at the water cooler.
Republicans censored the report proving their tax cuts are disastrous
In 2012, the Congressional Research Service responded to a request by the Republican-led Congress to investigate the relationship between lowering taxes and the economy. Presumably, they wanted to prove that they were right, and that tax cuts really do make everyone else better off. But two weeks after the report came out, it disappeared.
The New York Times and Forbes both reported inside sources as saying Congressional Republicans forced the report to be taken down. Fortunately, Senate Democrats put a copy back up for everyone to read.
The report put to the test the argument by “advocates of lower tax rates… that reduced rates would increase economic growth, increase saving and investment, and boost productivity (increase the economic pie).” The conclusions say it all:
The results of the analysis suggest that changes over the past 65 years in the top marginal tax rate and the top capital gains tax rate do not appear correlated with economic growth. The reduction in the top tax rates appears to be uncorrelated with saving, investment, and productivity growth. The top tax rates appear to have little or no relation to the size of the economic pie. However, the top tax rate reductions appear to be associated with the increasing concentration of income at the top of the income distribution. As measured by IRS data, the share of income accruing to the top 0.1% of U.S. families increased from 4.2% in 1945 to 12.3% by 2007 before falling to 9.2% due to the 2007-2009 recession. At the same time, the average tax rate paid by the top 0.1% fell from over 50% in 1945 to about 25% in 2009. Tax policy could have a relation to how the economic pie is sliced—lower top tax rates may be associated with greater income disparities.
The takeaway message for you and me is that lower taxes on the rich does not stimulate the economy, increase economic growth, or make everyone else better off. Lower taxes on the rich make them richer, leaving less for the rest of us. That is disastrous.
These aren’t alternative facts. That isn’t fake news. Just a bunch of Republicans who, “when their math doesn’t add up,” as Sander Levin (D-MI) said back in 2012, “claim that their vague version of economic growth will somehow magically make up the difference.” Or put another way, an entire political party whose economic policy comes out of Dick and Jane.