You've heard the refrain by now. If it weren't for those burdensome taxes on millionaires and corporations, we'd be swimming in jobs. You say we have a budget deficit? Well we can't possibly raise taxes on millionaires, or they'll move out of the country. Forget about raising taxes on corporations, they'll pass those costs onto the consumer. The only solution is to cut government services.
Right?
Wrong.
Recently, you've probably heard Tim Pawlenty's insistance that corporate taxes are too high, despite the fact that Bank of America, among others, are paying $0 in corporate income tax. The libertarians and modern right-wing would like to draw your attention to the baseline corporate tax rate, one of the highest in the industrialized world. But this obfuscates the actual taxes being paid, called the effective tax rate. This rate is actually quite comparable to other countries.
Libertarian types insist that a lower corporate tax rate will maximize tax revenue, because (they say) if the corporate tax was lower, then corporations would have no incentive to hide income in tax havens. They call this the Laffer curve. But this theory is badly flawed, and the data proves it. Thanks to special tax breaks that corporate lobbyists have asked for and received, corporate tax revenues have been on a downward trend, both as a percentage of GDP and total federal revenue. This, even as corporate profits are on an upward swing. So much for the Laffer curve.
Okay, so corporations are paying fewer taxes, and profits are up. Another policy trend over the past thirty years is cutting the top marginal tax rate for the nation's highest earners. According to the Republicans, all this should be enough to send our economy soaring, create jobs, and raise wages. It turns out that it did make life better--for the ultra-wealthy. Wages have been rising--for the rich. And for the rest of us? Crumbs. None of the corporate profits or tax cuts for the wealthy have trickled down at all. So much for trickle-down economics.
What about the national debt? Republicans will say that "we don't have a revenue problem, we have a spending problem," and claim that cutting programs for the middle and lower class is the solution. Of course, they're being disingenuous--remember which party is responsible for running up the national credit card. All the while, tax revenues have been mostly flat over the past several decades. But even as corporate tax revenue is falling, tax collection for social insurance has gone up. This is the Republicans' excuse to cut government programs. They are determined to make sure their biggest campaign donors pay fewer taxes, and that the least fortunate in society should bear the burden.
What we're seeing here are policies carefully crafted to benefit the wealthiest Americans, disguised as an economic theory. The Republicans are seeking campaign donors from the very richest Americans by making policy that favors them. Through handouts to corporations and tax cuts for the wealthiest Americans, the tax burden has been shifted to the backs of the middle and lower class. Whatever "trickle down economics" is claimed to do, whether it is creating jobs or raising revenue, it has demonstrably failed. The only logical explanation for Republicans' insistence on continuing these policies is to make the rich richer and keep the poor, poor. Their campaign contributions depend on it. Government by the rich, for the rich.