“Trickle Down” Only Works When Corporations Are Incentivized to Spend Money

American Prosperty Was Built On Tax Writeoffs: A case for ending off-shoring and raising taxes to “Make America Great Again.”

Here’s the deal: no matter what the corporate tax rate is, corporations are gonna find ways to not pay taxes. The same goes for rich people. Hell, the same goes for middle class and poor people. No one likes to pay taxes, and if there are ways to get out of them, they will be utilized.

This was even true back inthe 1950s, when President Eisenhower’s corporate tax rate was as high as 90%. Interestingly, its during this time period that Trump supporters seem to believe America was “great,” and that’s what they’re hoping to take America back to when they “Make America Great Again.”

What was so great about this era? Well, one of the things that comes to mind is that the the economy was booming, people were being paid well, and the middle-class was at an all time high. And contrary to current Republican “logic,” that ridiculously high tax rate had a lot to do with it.

But how is that possible? Don’t high taxes discourage businesses from expanding?

They don’t have to.

Remember how I mentioned that no one likes paying taxes and they have been finding ways to get out of paying them since the dawn of time? It’s been taken to great extremes in the past few decades, with corporate profits soaring and shareholders accumulating literal mountains of wealth, while companies like General Electric never pay any income tax at all.

Back in the good ole’ days of the 1950s, the mega-successful companies weren’t necesarilly paying more than they are now, even with that 90% tax rate. And I’m going to say something shocking. I’m going to argue that this tax dodging is completely fine.

The problem now, however, is how corporations avoid taxes.

The Panama Papers revealed networks and techniques for stashing money off-shore in order to avoid paying the feds. Over the decades, endless loopholes have been introduced into the tax code that allows rich people to make greater and greater levels of wealth while hardly paying any taxes on it.

These are luxuries that the wealthy during Eisenhower’s era didn’t have. So how did they do it?

If you’re a freelancer, or a run a business yourself, you’re very aware of write-offs.

Your office space? That’s a write-off. People you pay to help you? Those salaries and fees are write-offs. Business lunch? That’s a write-off. Major, billion dollar companies operate much the same way. And back in Eisenhower’s era, if they wanted to lower their tax liability, it was in their best, most profitable interest to hire as many people as possible, pay them as well as possible, give them the best benefits possible, and own the most real estate possible, so that they could lower their adjusted gross income and pay Uncle Sam less. But the side-effect of spending all that money? They were able to massively grow their companies and make America the biggest economy in the entire world.

And this is the real trickle down economics:

All those people they hired and paid so well? They were able to spend more money. Which created more jobs in the service and retail industries. Which increased sales tax revenue. And let’s not forget: all those salaries increased income tax revenue.

The reason the Eisenhower era was so good for the economy was because there were massive amounts of money circulating through it. Businesses were incentivized to circulate that money in order to lower their tax liability.

But over the decades, all those incentives have been systematically and strategically rolled back. If you work at a major company, you go to work every day knowing that you could be laid off at any moment. Corporations buy each other every single day, paying a fraction of the normal tax rate on their capital gains while laying off thousands of people due to workplace redudancies. It’s now more profitable for companies and their shareholders to squeeze as much labor out of as small of a staff as possible, because all they have to do to avoid taxes on the saved revenue is offshore it. There is no longer an incentive for them to hire people and treat them fairly. So they don’t.

We’ve seen a massive redistribution of wealth from the bottom classes of our economy to the richest elite in the world. There is no shortage of money. The problem is that it’s not circulating through the economy. It’s literally sitting in the bank accounts and investment portfolios of a very small minority of people who are bribing Congress for more favorable legislation and more favorable treatment to suppress the wages of working class people.

If we really want to “Make America Great Again,” we need to do the opposite of what the Republicans are doing. We need to close these tax loopholes, mandate that people be paid better and incentivize companies to profit sustainably instead of profit cancerously.