Letter to the Editor: Barely a trickle to the middle or the bottom

To the Editor:

I am writing in response to Mr. Engle’s letter of November 14 in which he attempted to defend the Republicans’ massive tax give away to corporations and the wealthy.  Although corporations did face a top federal tax rate of 35%, given the loopholes and exemptions the corporate lobbyists had already written into the tax code, the actual rate corporations paid before the new tax bill was much lower.

One study of 280 of the largest corporations found they had pretax profits of $1.4 trillion, but the maximum any one of these corporations paid was about 28.5%, and some paid nothing at all.  Overall, the average rate was 13% to 15%.

Although the argument for giving corporations a financial windfall was that they would use that money to expand their businesses, invest in research and raise workers’ pay, companies spent much of their increased wealth on buying back their own stock, thereby, raising the companies’ stock prices.  This, of course, is beneficial for stockholders and the executives (many of whom are compensated with stocks).

Mr. Engle correctly points out that all who own stock will benefit. However, what he fails to appreciate is how the massive growth in income and wealth inequality in American society drastically limits the gains to the working and middle classes. Thirty-five percent of all U.S. corporate stock is owned by foreigners. Of the remaining stocks, 84% is owned by the wealthiest 10% of households, that includes people’s stakes in pension plans 401(k)s and individual retirement accounts.

According to a recent analysis, most households had less than $5,000 in total holdings in 2016 (the last year data was available).  Any increase in the value of their stock holdings is hardly equivalent to the $51,140 average tax savings given to the top one percent of families.

As for businesses making capital investments, it is true that spending on fixed investments, like machinery, buildings and equipment, did rise during the first and second quarters of this year, 11.5% and 8.7%, respectively.  However, by the third quarter it had dropped to an annual increase of only 0.8%.

In terms of job growth, a study by the National Association for Business Economics found in October that 81% of 116 companies surveyed had not changed their plans for hiring because of the tax bill. And based on a study of 1,000 large public companies, Just Capital (a nonprofit research group) found that since the tax cuts, the companies actually had reduced net employment by nearly 140,000 jobs.

Just Capital also calculated that the typical worker had received only about $225 this year in increased salary, a one-time bonus, or both, that was attributable to the tax cuts. And more broadly, the Labor Department reported in September that inflation-adjusted wages had risen only 0.5% from last year.

Stagnant wage growth has a direct affect on Iowa. A recent study by the United Way of Iowa found that between 26 percent and 52 percent of the population in every Iowa county failed to meet basic household expenses, that is, money necessary for housing, child care, food, transportation and health care.  Forty-one percent of senior households fell below their basic threshold.

Although some benefits do trickle down to middle- and low-income Americans, they do not disguise the basic nature of the tax cuts. The Republican tax law is a massive gift to corporations and the wealthiest among us and further contributes to the growing economic inequality in American society while also helping to raise the federal budget deficit in fiscal year 2018 by $113 billion, or nearly 17%.

Thomas Hill
Lansing

 

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