The stated reason for tax cuts on capital is that they result in increased investment, which increases productivity and ultimately trickles down to workers in the form of slightly higher wages. Experience over the last 40 years has repeatedly told us that this proposition is false, at least under current conditions. Even if it is doubtful that Republicans actually believe it, however, it remains the default GOP position as of today. Why?
Consider the issue from the perspective of the GOP factions:
- For PBPs, promoting tax cuts on capital is a matter of compelling material self-interest. In addition, it is a gesture of official respect for their invaluable services as job-creating economic supermen. Nothing upsets a PBP more than the suggestion that he didn’t really make that by himself.
- For CLs, all taxes are a burden on liberty, and should be cut to a bare minimum. CLs also cling to the forlorn hope that tax cuts will force the federal government to starve the beast. It didn’t work for Reagan, and it won’t work now.
- The Reactionary position is complicated. On the one hand, the typical Reactionary worker is resentful of plutocrats, and gains little from tax cuts on capital, since he doesn’t have much. On the other hand, many Reactionaries are small business owners, who profit to some extent from these tax cuts, and in any event, support for tax cuts has been a critical part of the bargain that keeps the GOP united against the left. Lose the support of big capital, and you lose elections and the existential battle against wokeness–at least, so goes the theory.
- CDs don’t really support tax cuts for business, but they aren’t really voting for the GOP at this point, anyway, so they don’t count.
The big question for the GOP going forward is whether the Reactionary/PBP bargain will hold in a changed environment in which the Reactionaries numerically dominate the party and increasingly call the shots. Will the Reactionaries embrace New Right economic thought and simply demand that business fall in line? I don’t think that will happen in the next election cycle, but we’ll see.