REPORTS EXPOSE DEEP HARMS OF CORPORATE TAX CUTS AND ‘TRICKLE
DOWN’ IDEOLOGY  
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Jake Johnson
January 23, 2024
Common Dreams
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_ "Failing to reimagine a more ambitious and comprehensive use of
corporate tax policy prevents us from achieving a more equitable,
sustainable, and democratic economy." _

Ronald Reagan Then-U.S. President Ronald Reagan was pictured speaking
at a fundraiser. , Dirck Halstead/Getty Images

 

Two new reports published Tuesday by the Roosevelt Institute argue
that robust corporate taxation is key to creating a strong economy and
improving the well-being of families and children—objectives that
have been undermined in the decades since the Reagan era by regressive
tax cuts enacted on the false premise that benefits would "trickle
down" to the rest of society.

The first report, _A Mapping of the Full Potential of U.S. Corporate
Taxation to Enhance Child and Family Well-Being_
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examines what the authors describe as the understudied notion that
"increasing corporate taxation will necessarily help children and
families by providing additional revenue for essential public
services."

That perspective runs counter to what the Roosevelt Institute's second
report
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calls "a 'cut-to-grow' mentality" that rose to prominence in the 1970s
and was enthusiastically embraced by the administration of President
Ronald Reagan.

"Under this view, the thinking went, it was necessary to reduce the
corporate tax rate to grow the economy—and that this growth would
allow gains to eventually 'trickle down' from the rich shareholders to
the middle class," the report states. "During this time, the corporate
tax rate was gradually reduced to 35% before it was dramatically cut
to 21% in 2017. These cuts resulted in corporate tax revenues falling
to less than 10% of total federal revenues."

"Perhaps more than any other, President Ronald Reagan leveraged
mounting backlash to taxation and government spending to dramatically
reduce both, regardless of the consequences to American families," the
report observes.

"Corporate tax policy since Reagan has been driven by the trickle-down
economics narrative that cutting the taxes on 'job creators' will
benefit less wealthy U.S. taxpayers."

The decades-long decline in corporate tax rates has severely
undermined the federal government's ability to finance critical public
goods, from education to childcare.

"Since regressive corporate tax cuts don't significantly increase
earnings for working families (through either wage or employment
increases), but they do reduce the government's ability to fund family
income and care supports, childcare costs—which are already
rising—can become a relatively more expensive line item in working
parents' household budgets," reads the Roosevelt Institute's first
report, authored by Emily DiVito and Niko Lusiani.

"When they can't afford childcare," they added, "parents face the
difficult choice of having to cut costs in other places—often on the
basic necessities that allow children to thrive, like food, clothing,
and enrichment activities—or taking on additional caregiving duties
themselves."

At the state and local levels, DiVito and Lusiani noted,
"corporations' successful efforts to avoid their full property tax
liability devastate public school budgets."

DiVito, deputy director for the corporate power program at the
Roosevelt Institute, said
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Tuesday that "we have a false idea in the U.S. that corporate tax
policy is unrelated to equitable social reforms."

"However, strong corporate tax policy is vital to all aspects of a
thriving economy," she argued. "And the failing to reimagine a more
ambitious and comprehensive use of corporate tax policy prevents us
from achieving a more equitable, sustainable, and democratic economy
and society for all families."

The new reports come a week after a bipartisan pair of House and
Senate negotiators announced a deal
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to expand the child tax credit (CTC) for three years in exchange for a
series of corporate tax cuts
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_The American Prospect_'s David Dayen estimated
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the time period when all the tax credits are actually in place, the
business tax changes are five times more costly than the CTC changes."

"Who knows if this deal can pass in time to take effect in the
upcoming 2023 tax season, if ever. Sen. Mike Crapo (R-Idaho), the
ranking Republican on the Senate Finance Committee, is already asking
for changes
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to make it even more generous to businesses. That's in part a function
of the dissembling that there is 'parity' in the deal. The truth is
that this is not an equal trade. And it may extend that inequity well
into the future."

That warning is in line with the Roosevelt Institute's new research,
which argues that a corporate tax code generous to big business fuels
inequality by "benefiting capital interests (i.e., business owners,
partners, and shareholders) at the expense of workers and their
families."

"When corporations enjoy low taxes on their profits, they face a
trade-off for how to otherwise disperse them: make investments in the
workforce and productive capacity (e.g., raise wages, hire more
workers, and/or upgrade buildings, equipment, or technology) or
distribute them to shareholders (i.e., pay out dividends and buy back
stock to inflate prices). Data shows that executives typically choose
the latter."

Reuven S. Avi-Yonah, a professor of law at the University of Michigan
and the lead author of the new report on "cut to grow" ideology, said
in a statement that "corporate tax policy since Reagan has been driven
by the trickle-down economics narrative that cutting the taxes on 'job
creators' will benefit less wealthy U.S. taxpayers."

"Such an idea is often offered in tandem with the notion that this is
the only way tax policy can help American families," said Avi-Yonah.
"But this just isn't true. In fact, this false 'cut-to-grow' narrative
has made it very difficult to argue for a more expansive, progressive
vision of corporate tax reform—contributing to a decades-long
stalemate in efforts toward real comprehensive corporate tax reform."

"Now is the time," he added, "to reverse this trend with a more
historically grounded support of the corporate tax."

Jake Johnson is a senior editor and staff writer for Common Dreams.

Our work is licensed under Creative Commons (CC BY-NC-ND 3.0). Feel
free to republish and share widely.

 

* Roosevelt Institute Reports; Corporate Tax Policy; Reagan's Tax
Policy;
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