Op/Ed: And This Is the Legacy We Leave Our Children?
JD Lock, Lieutenant Colonel, US Army (Retired)
3 December 2017
Congratulations, America, we continue to drink the Kool-Aid, applauding Congress’ passage of a much hyped ‘Tax Overhaul Bill’ that overhauls fundamentally nothing while continuing to handsomely line the pockets of the wealthy and blowing an even more massive hole in federal revenues.
While there are so many things wrong with this yet to be reconciled bill, there are two perpetual myths that we Americans continue to drink in.
Myth #1: The U.S.’s top tax rate of 35% seriously impacts our economic competitiveness.
Really? Let’s ask the most obvious question. While the top statutory tax rate of 35% in the U.S. is higher than that of 30 other Organization for Economic Co-operation and Development (OECD) countries, which U.S. corporations actually pay a 35% effective tax rate? According to the Congressional Research Service (CRS), most likely none from 2008 to 2012, given 26 Fortune 500 companies, to include General Electric, Boeing and Verizon, paid no federal income taxes, while 111 other Fortune 500 firms paid zero federal taxes in at least one of those five years. Overall, a total of 288 Fortune 500 corporations paid an average effective federal tax rate of just 19.4%.
In the end, this onerous 35% corporate tax rate is a non-burdensome average effective tax rate of 27.1%, less than the 27.7% OECD average. As a Service Disabled Veteran Owned Small Business, at least I fulfilled my patriotic duty by paying on average a 28% effective federal tax rate every one of those years – yes, tongue in cheek.
Myth # 2: A tax cut for Corporate America and the Top 1% will spur major economic growth.
The GOP claims that reducing the corporate tax rate will substantially grow the economy, an unproven claim that is counter to the historical findings of CRS and Economic Policy Institute studies.
Perhaps, most telling of all, however, was a 14 November Wall Street Journal conference for CEOs. During a panel discussion, the moderator asked the business executives in the room for a show of hands, “If the tax reform bill goes through, do you plan to increase investment?” Barely a hand was raised. From the dais, a surprised Gary Cohn, the White House economic policy adviser, nervously asked, “Why aren’t the other hands up?”
Why aren’t the other hands up? Here’s a quick lesson, Gary, it’s called ‘Supply vs Demand.’ A majority of companies have already indicated that most, if not all, of the tax breaks will go back to their shareholders, 70% of whom are the Top 1%, and not into wages or new employees. Demand only increases when there is additional discretionary money to be spent. Where is that additional discretionary money, the demand, if 70% of this tax break goes to the Top 1%? America’s economic might rests with the spending habits of middle class Americans who, in this instance, will receive nary a benefit.
Sadly, lost in euphoria of this triumph is the fact that the fiscal ‘time bomb’ known as the national debt continues to tick away. Currently, this debt is $20T and, while it’s acknowledged that any final version of this bill will add another $1T in ten years to the debt, that will be in addition to an additional $10T of deficit spending over that same time frame. Ten years from now? We’re looking at a mind numbing national debt of $31T! Fiscal responsibility?
Congress’ shell game is played in the muddy waters of fiscal obfuscation, misdirection and ignorance and we, the American society, never seem to question the numbers nor the agendas designed to benefit the few. In the end, though, the trouble lies not with Congress nor the president. The true fault lies with ourselves, a myopic American society that’s looking for instant gratification and lacks the long-term vision to grasp the impending fiscal danger. Not the hallmark of a great nation.
I enlisted at the age of 17 and continued to serve on active duty for 24 years while other West Point classmates of mine left after five years of active duty to make their Top 1% fortunes. I don’t begrudge them that. After all, I had similar opportunities. However, I do resent it when the market is at its highest point in history, companies are awash in profits subsidized with cheap debt and American taxpayer money following a ‘great recession’ and, now, we add to their wealth and bottom line by placing an even greater national debt burden on ourselves?
Senator Lindsey Graham (R-SC) noted that “If I'm wrong, we'll pay a price” if these massive cuts for corporations and the upper class do not bring back jobs and investments. No, senator, neither you nor I will pay the price. Our legacy will be that our children and grandchildren will pay the price.
Nicely done. Let’s raise a toast.