Cutting Taxes For The Wealthy Does NOT Help The Economy–Here’s Why (Video)

Tax cuts.

The very mention of them sends shivers down conservative and progressive spines.

Progressives take issue with their tax dollars helping to perpetuate a military industrial complex and subsidies to fossil fuel corporations, while conservatives and Tea Partiers rail against social safety nets like food stamps, Medicare, and Medicaid.

The proposed budget Republicans unveiled last month took aim at working families, the elderly, children, the sick, and poor with a $5.4 trillion cut over 10 years that would ratchet up defense spending and transfer wealth to the top one percent of the population; i.e., the richest Americans.

A report out of the Economic Policy Institute (EPI), though, explains not only why this will do nothing to help working families, but also why it should not even be a priority in our current economic climate.

The first point pertains to the Republican budget. The report states:

Tax cuts provide no durable solution to any genuine economic problem for America’s working families, but do make some genuine problems even worse.”

Under this plan, those already wealthy would see the most significant gains. Low- and middle-income families, however, would receive a pittance.

Since 1979, the wealthiest Americans have seen their incomes increase 160 percent. The middle 20 percent of families, however, have only achieved a modest 13.6 percent increase because of policy decisions that have transferred economic power away from low- and moderate-wage workers toward capital-owners and corporate managers.

In light of this, the EPI reports:

“Tax cuts for the rich would just further direct resources to the top of the income distribution, and would also provide even greater incentive for capital-owners and corporate managers to rig the economic rules to send more income their way. Solving the problem of degraded economic leverage leading to near-stagnant pay for the broad middle class should be the economic priority of Congress.”

Moreover, the federal government contributes the highest percentage to healthcare costs, which for decades have grown faster than overall economic growth. Tax cuts reduce this at a time when we will need more revenue to honor commitments to Medicare and Medicaid.

We’re aware of the recent pushes from the right to rob millions of Americans of their healthcare. Republicans claim Medicare, Medicaid, and the Affordable Care Act (aka Obamacare) are “too expensive.”

In reality, cutting them shifts healthcare costs onto individual Americans. These federal programs are more efficient than private insurance at containing costs.

What about the Republican claim that slashing corporate taxes grows jobs and investments or wages?

Also untrue.

The wealthy are less likely to spend an additional dollar for every dollar in cuts than low- or middle-income households, who spend every dollar they make.

Instead, EPI suggests:

“[Congress] should either target tax cuts at low- and middle-income families, or boost spending directly.”

Corporate savings are high while interest rates are low. This combination indicates that a hindrance to investment is sluggish demand, not insufficient savings; therefore, changes aimed at reducing consumption to bolster savings are inclined to discourage growth.

EPI states:

“Workers are more valuable but companies aren’t paying them more. The disconnect between productivity growth and wage growth is the result of a set of intentional policy decisions that have eroded the bargaining power of workers. Cutting corporate tax rates is not the solution that will reverse this trend.”

Another popular talking point on the right is that US corporations pay more income taxes than other countries.

Again, not true.

U.S. corporations pay much less than their international counterparts. In 2015, revenue raised through corporate taxes equaled 2.2 percent of gross domestic product (GDP). The statutory U.S. corporate tax rate is 35 percent, but by exploiting loopholes, most corporations pay an effective tax rate between 12.5 and 21.2 percent.

A popular loophole is “deferral,” which accounts for 47 percent of government revenue lost to corporate tax expenditures. This allows American corporations to pay nothing on overseas profits unless those profits are “repatriated”– or returned–to the United States.

About it, EPI reports:

“Republican tax plans would make this loophole permanent, by moving the corporate tax code to a ‘territorial’ system that permanently moves the tax rate on foreign-booked profits to zero.”

Think companies are coming back any time soon under this economic model? Wouldn’t allowing companies that have moved overseas to return home help in the long run?


Corporations enjoying this loophole are not investing in our economy; they’re elevating shareholder profits.

According to the EPI report:

“Apple has $230 billion offshore but recently took on $6.5 billion in debt to repurchase stocks and boost its share price, allowing owners to realize a potential capital gain. Microsoft has $124 billion offshore but borrowed $26 billion to buy LinkedIn.”

Overall, the best investment is in low- and middle-income Americans’ financial security, not in the practice of handing more money to those who already literally have too much.

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Ted Millar is poet and teacher. His poetry has been in featured in myriad literary journals, including Caesura, Circle Show, Cactus Heart, Third Wednesday, and The Voices Project. He is also a contributor to Op-Ed News and Liberal Nation Rising.