Four notorious right-wing economics commentators (I’m not sure it’s accurate to call them economists) penned an op-ed in yesterday’s NYT calling for a deferral of tax “reform” and an immediate cut to the corporate tax. In their view, the benefit of the tax cut will be enjoyed primarily by employees, not shareholders, and some of the rest will generate new investments and growth.
I’m not an economist, and I haven’t made a study of this, but I can apply common sense to the facts. Their argument is implausible, for the following reasons:
- Plenty of corporations are already sitting on cash mountains. To the extent that the money is being used at all, it is for share buybacks, not for wage increases or new investment. Why would increasing the size of the mountains make any difference?
- It makes sense to conclude that workers would get most of the benefit from the additional corporate earnings if you assume that they, and not the management or the shareholders, hold most of the bargaining power. This would occur in fields with labor shortages and/or powerful unions. Does that sound like an accurate description of most businesses in America in 2017?
It is my understanding that the vast majority of studies show that the principal beneficiaries of a corporate tax cut are capitalists. If and when this happens (and I think it will), expect the cash mountains to grow, and for share prices to rise, and not much else, other than an increase in the federal deficit.