For Immediate Release
Why Trump’s Newest Corporate Tax Cut Plan Is a Bad Idea By David Demers* “I will cut taxes” is the safest promise a political candidate can make before an election. After all, who doesn’t feel overtaxed? All Americans, regardless of income, pay about 27 percent of their income in local, state and federal taxes, according to the book The Triumph of Injustice by economists Emmanuel Saez and Gabriel Zucman. The federal income tax is progressive, meaning that the more you make, the more you pay. But the American tax system overall is unprogressive for everyone except billionaires, who pay the lowest overall tax rate (23 percent). Presidential candidate Donald Trump is now proposing another tax cut for corporations if billionaires contribute more money to his re-election campaign. Remember his 2017 tax cut, which reduced corporate tax rates from about 35 percent to 21 percent? That produced a windfall for corporations. But instead of sharing the wealth with their employees or consumers (cutting prices on goods and services), many corporations bought back their own stock (about $1 trillion), which boosted the share price and, in turn, the value of the investment portfolios of their wealthy executives and stockholders. Polls show that most Americans know wealth and income gaps are growing. But they tend to underestimate the gaps and don’t understand what is happening. The wealthiest 10 percent of Americans currently have an average of $3.5 million in assets. The bottom 50 percent have about $14,000, and the middle classes (the 50 to 90 percent group) have about $140,000. Since 1950, taxes on the working and middle classes have increased 59 percent, from 17 percent to about 27 percent. Billionaires have seen their taxes decline 67 percent, and the top 10 percent most wealthy have seen their taxes decline 17 percent. In terms of federal taxes, the wealthy are paying about 50 percent less than they did before 1980, according to my estimate. Most of these tax cuts were enacted during the presidencies of Ronald Reagan, George W. Bush, and Donald Trump. So where is the money coming from to make the wealthy wealthier? The national debt. The debt increased from $900 billion in 1980 to $34 trillion today. America is witnessing the biggest transfer of wealth to the wealthy in history. And, to be clear, the debt is not coming from too much spending. When controlling for inflation, the average annualized (compounded) increase in federal expenditures since 1980 has been just 2.3 percent. The problem isn’t spending — it’s revenues. The government isn’t collecting enough tax revenue (currently only about $4.4 trillion per year). My projections over the next 15 years show that the wealthiest 1 percent will see their wealth double, from about $18 million to $34 million in 2037 (inflation-controlled increases). The 1 percent will have 1,533 times more wealth than the bottom 50 percent ($34 million vs. $20,836). The super rich (top 1%) will continue to acquire wealthier faster than the rich (top 10%), who in turn will continue to acquire wealth faster than the bottom 90 percent of all Americans, who will become poorer in relative but not absolute terms. Their incomes will increase slightly, but they will get less and less of the total wealth pie. They will continue to fall behind. It’s not yet clear how much Trump intends to cut corporate taxes if he’s elected. But if it’s substantial (say from 21% to 15%), the consequences could be catastrophic. As the debt exceeds the Gross Domestic Product, the probability of bankruptcy and dire economic consequences increases. That’s what happened in Iceland in 2008. America’s debt-to-GDP ratio, currently at 121 percent (100% if you exclude intergovernmental debt), is now greater than the tipping-point in Iceland. The Wharton School estimates that America’s tipping point is 200 percent. My estimates show that this threshold will be reached in 10 years, when the debt is $70 trillion (that assumes things continue on the present course). With additional tax cuts, that tipping point could come sooner. But even if the debt-to-GDP ratio remains stable, America cannot continue to dole out massive tax breaks to the wealthy. As the debt grows, so does the wealth gap and the slide toward plutocracy. The money to pay off the debt cannot come from the working- and middle-classes. Polls and research show they are struggling more than ever to pay their bills. If the wealthy were smart, they would realize that their financial future also is in jeopardy if they don’t give back some of the wealth they obtained from tax cuts that favored them. But will they? *Dr. David Demers is author of Falling Behind: Why Wealth Gaps Are Preventing You and Half of America from Getting Ahead, which will be published in 2025. He has written two dozen books and worked as a professor of communication and sociology at Washington State University before retiring to spend more time writing books. He lives in Phoenix. |
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For Immediate Release U.S. Faces Economic ‘Catastrophe’ If it Fails to Increase Taxes on Wealthy, Sociologist Warns ‘America Is Going into Debt to Make the Wealthy Wealthier’ The United States will undergo a major economic crisis within 10 years if it doesn’t increase taxes on the wealthy, a sociologist warns in a new book about wealth gaps. “If the national debt is not reduced ... there will be a major economic catastrophe,” Dr. David Demers argues in the introduction to Falling Behind: Why Wealth Gaps Are Preventing You and Half of America from Getting Ahead. Demers, who worked as a tenured professor at Washington State University before retiring to write more books, says the current $34 trillion national debt will balloon to $70 trillion by 2034 if federal tax policies continue to favor the wealthy. “At that time, the ratio of the debt to the Gross Domestic Product (GDP) will approach 200 percent, which is the tipping point, according to the Wharton School of Business at the University of Pennsylvania.” Iceland declared bankruptcy in 2008 when its debt-to-GDP ratio hit 110 percent. America’s current debt-to-GDP ratio is currently at 121 percent (or 100% if intergovernmental debt is excluded) and is climbing every year. Demers’s research also shows that the massive and growing federal debt stems not from spending too much, but from a failure to collect enough taxes from the wealthy. “America is going into debt to make the wealthy wealthier,” he writes. “Some politicians blame government spending for the debt. But even with the $10 trillion spent to combat the 2008-2009 Great Recession and the 2020-2023 COVID pandemic, inflation-adjusted federal government spending has only grown at an annualized (compounded) rate of 2.27 percent since 1980. The problem isn’t spending. The problem is a failure to raise enough tax revenue to reduce the debt.” Demers argues that the tax revenues needed to pay down the debt cannot come from the working and middle classes, because they are already overtaxed. Since 1950, taxes (local, state and federal) on the working and middle classes have increased 59 percent, going from 17 percent to about 27 percent, he writes, citing data from the 2019 book The Triumph of Injustice by Emmanuel Saez and Gabriel Zucman. In contrast, billionaires have seen their taxes slashed 67 percent and the wealthiest top 10 percent have seen their taxes decline 17 percent. Most of these tax cuts were enacted during the presidencies of Ronald Reagan, George W. Bush, and Donald Trump. Overall, the wealthy are paying about 50 percent less in federal taxes than they did before 1980, Demers estimates. Citing federal and international data sources, Demers points out that the wealthiest 10 percent of Americans currently have an average of $3.5 million in assets. In contrast, the bottom 50 percent have about $14,000, and the middle classes (the 50 to 90 percent group) have about $140,000. “The American Dream is under assault,” he says. Unproofed drafts of selected chapters of Falling Behind are available online at DrDavidDemers.com Falling Behind will be published in 2025. Demers is author of two dozen books, including The Ivory Tower of Babel: Why the Social Sciences Are Failing to Live Up to Their Promises, and worked as a professor of communication and media sociology at Washington State University before retiring to spend more time writing books. He lives in Phoenix and can be reached at [email protected] _________________________________________ For Immediate Release Wealth Gaps Will Soar If Taxes Remain the Same, Sociologist Says In the 2017 documentary “Inequality for All,” President Bill Clinton is shown thanking Secretary of Labor Robert Reich, who was standing behind him on the White House grounds, for his service to the country. The year was 1996, at the end of Clinton’s first term in office. Reich had just resigned from his position partly to spend more time with his family. But that wasn't entire reason. Reich, an economics professor who had spent much of his life promoting economic equality, was frustrated that administration officials would not reinvest budget surpluses into programs that would have helped reduce economic inequality. “[T]here wasn't the political will to do that,” Reich says to the camera. “Bill Clinton did preside over one of the best economies we’ve had in this country in living memory. The wages of most people went up. Poverty actually declined. But we didn’t do enough. We didn’t really alter the underlying trend.” A short time later, in a heartfelt moment, he says: “I — I do ask myself whether I’ve been a total failure. I’ve been saying much of the same thing for 30 years and some of the trends have grown worse. Inequality has become worse. The danger to the economy and democracy have become worse.” Reich was right. So what happens to wealth gaps if America continues down this path? In his book Falling Behind: How Wealth Gaps Are Preventing You and Half of America from Getting Ahead, sociologist David Demers predicts that over the next 13 years show that the wealthiest 1 percent will see their wealth double, from about $18 million today to $34 million in 2037 (inflation-controlled increases). The 1 percent will have 1,533 times more wealth than the bottom 50 percent ($34 million vs. $20,836). The super rich (top 1%) will continue to acquire wealthier faster than the rich (top 10%), who in turn will continue to acquire wealth faster than the bottom 90 percent of all Americans, who will become poorer in relative but not absolute terms. Their incomes will increase slightly, but they will get less and less of the total wealth pie. By 2050 the wealth gap will soar to 1,749. The top 1 percent will have average assets of $53,527,284, while the bottom 50 percent will have only $30,599. The percentage of wealth held by the top 1 percent will grow from about 30.3 percent to 38.1 percent. The bottom 90 percent’s share will decline from 77.3 percent to 69.7 percent. In relative terms, the bottom 90 percent will continue to fall behind the top 10 percent. | ||