The GOP was hellbent on reforming the tax system, and bringing with it…the apocalypse?
Something recently happened in Washington, D.C. so shocking and unexpected that Bernie Sanders had to be resuscitated on the Senate floor by waving a $100 bill under his nose: the Republicans accomplished something. President Trump signed the Tax Cuts and Jobs Act on December 22nd, just a few days after it was passed by the Republican House and Senate. This tax bill lowers the individual rate for all tax brackets by a couple percentage points, but the big news is that it lowers the corporate tax rate from 35% to 21%.
What do Democrats have to say about a bill that gives a tax break to 91% of Americans?
• Nancy Pelosi said that the GOP tax bill “is the end of the world…This is Armageddon.”
• Chuck Schumer claims that Trump is “Santa to the Rich, Scrooge to the poor.”
• Sen. Joe Donnelly (D-Ind.) took to the Senate floor to claim that, “Instead of providing a tax cut that overwhelmingly benefits the middle class, this bill cuts taxes for the wealthiest Americans while raising taxes on a majority of families making less than $75,000 in the coming years.”
• “This tax plan doesn’t live up to the commitment I got from President Trump, when he told me he wouldn’t support tax reform that benefited the very rich at the expense of the little guy,” said Sen. Claire McCaskill (D-Mo.)
To nobody’s surprise, Democrats are angry that corporations got a huge cut while individuals received a modest cut. As if that wasn’t enough to make liberals bleed from their wherevers, the Republican tax bill makes the corporate rate cut permanent while the individual rate reduction expires after 10 years.
While the Democrats are wrong about this bill not cutting taxes for individual Americans (even Bernie Sanders admits that 91% of Americans are getting a tax cut), there is no debating that the Republican-crafted Tax Cuts and Jobs Act heavily favors corporations.
Have the Democrats been right this whole time? Are rich corporations not paying their fair share? In fact, the Democrats are correct, in a sense. Rich corporations are not only skimping on their fair share, but they are paying little-to-no taxes at all. How can this be if the corporate tax rate isn’t 0%? How were they avoiding paying taxes if the old tax rate of 35% was one of the highest in the industrialized world? How can it still be true with the new 21% rate?
It’s simple: corporations make us pay their taxes. A corporation (also known as an evil big business) exists for one purpose: to make money by selling you a good or service. Taxes stand directly in the way of making more money. Therefore, they charge the tax to the consumer (also known as “the little guy”) by charging you more money for the stuff you want to buy.
For example, if a thing-a-jig costs $100 to make, then Evil Big Business, Inc. might charge you $150 so they can make $50 per sale. When the government tells Evil Big Business, Inc. to pay $25 in taxes, Evil Big Business, Inc. just raises the price of a thing-a-jig by $25. So, who is hurt by the $25 tax: the corporation, or the “little guy” paying more for it?
Democrats propose helping the middle class by raising taxes on businesses, but corporations just put that extra cost right back onto the middle class through one of two ways:
1. Higher prices to pay for the higher tax
2. Hiring fewer people and paying them less to make up for the higher tax
The Republicans in Congress recognize that lower taxes allow corporations to hire more people, and pay those people higher wages, all without having to pass the cost on to the consumer.
Last week, Cincinnati’s very own Fifth Third Bank said it will increase its minimum wage to $15 per hour as a direct result of the GOP tax bill. Fifth Third is also giving a $1,000 bonus to more than 13,000 employees (senior managers and executives excluded). AT&T is also giving bonuses to hundreds of thousands of employees thanks to the corporate tax cut. Additionally, AT&T announced it is increasing its capital expenditures by $1-billion which will result in more jobs as $1-billion in projects are completed. Sure, the Tax Cuts and Jobs Act will make the rich richer, but it is already making the poor richer and the middle class richer too.
The fact of the matter is that Democrats are kind of right about corporations not paying their fair share, but their solution is nothing more than a bunch of “covfefe.” A tax increase on corporations ends up being a tax increase on the “little guy,” but lowering their taxes allows them to pay their employees more and hire more people (without making us pay for it). Progressives derogatorily call this “trickle-down economics.” Its real name is “supply-side economics” and its success isn’t theory anymore. Just look at Cincinnati.
Follow this author on Twitter: @KyleKirker