Listen To You Tell Me Texas Friday 8/12/16
Donald Trump laid out his economic agenda this week in a speech to the Detroit Economic Club. His plan calls generally to sharply reduce taxes.
The most dramatic plank in Trump’s plan concerns corporate tax rates. They would be slashed. American corporations currently pay taxes on net income at the rate of 35 percent. Under Trump’s plan, that rate would drop to 15 percent.
Those on the right – including even his critics on the right – have generally praised Trump’s plan. Predictably, those on the left, including Hillary Clinton, have had nothing kind to say about it. Said Mrs. Clinton:
Here’s what we all know, because we heard it again: His tax plans will give super big tax breaks to large corporations and the really wealthy, just like him and the guys who wrote the speech, right?”
And thus we have a very clear contrast between what the Left believes and what conservatives believe. It boils down to a single question: who can better deploy the fruits of American enterprise – the federal government or those who actually produce the fruit?
Mrs. Clinton’s position plays to economic ignorance and stereotypes. Her rhetoric conjures images of heartless Gordon Gekkos sitting in plush offices in tall office towers hoarding great piles of cash created through the ruthless exploitation of workers and consumers.
At no time does Mrs. Clinton ever float the idea that profits are the result of having succeeded in a highly competitive marketplace.
So what do successful corporations and wealthy individuals do with the money they keep after having paid taxes on their earnings?
One thing they do not do is pile up cash. A big pile of cash is worthless. In the current zero-interest rate environment, it effectively loses value via inflation every month. On the balance sheet of a publicly traded company, it attracts the negative attention of shareholders who quite reasonably expect that the cash either be put to work doing something productive or distributed to shareholders in the form of a dividend.
Rich people and successful corporations put money to work. Wealthy people invest. They buy houses and cars and airplanes that thousands of people get paid to build and maintain. Companies create new products and build new facilities that result in the hiring of workers.
Every dollar taken away from companies and successful individuals in the form of taxes incrementally reduces such investment. When money is confiscated through taxation, instead of being deployed into the free market economy to create jobs and increase opportunities for workers and entrepreneurs, it is swallowed into the giant, inefficient, bloated and pustulated federal bureaucracy, where great gobs of it get wasted (see “American Recovery & Reinvestment Act of 2009,” a.k.a. the “Stimulus”).
Trump’s plan will ultimately increase federal revenues as a result of increased economic activity and increased earnings for individuals and companies.
Hillary’s plan to raise taxes will have just the opposite effect.
The choice – little understood as it is by far too many – really is that simple.