As it turns out, the supporters of the corporate tax cut aren’t really arguing that the additional cash pouring into corporate coffers will then be distributed directly to workers in the form of higher wages. The argument is, instead, that the additional funds will be invested in new ventures, that the new ventures will need workers, and that wages will increase as a result of higher demand for labor.
This is, of course, just another way of calling on that old trickle-down magic that has served us so well over the last 40 years. Leaving aside the lack of recent historical support for the notion that a rising tide lifts all boats, the argument has the following logical weaknesses:
- American corporations are already sitting on massive cash mountains, and interest rates are very low. A lack of access to capital is not the reason they are not investing. Why would increasing the size of the cash mountains make any meaningful difference?
- Even if you accept the argument that we will see a massive increase in investment, why would you assume that American workers will benefit from that, given that the money could be invested in firms using large numbers of foreign workers or robots?
The bottom line is that the investment problem is driven by a lack of demand, which in turn is caused by demographic trends and the hollowing out of the middle class. The Trump tax cut will do nothing to address either issue, and will only enrich shareholders.