So, what about the Trump tax plan?
Isn’t it obvious that reducing corporate taxes is a sop to the rich?
Actually, no. Here’s why. The current top corporate tax bracket is 35%–among the highest in the world. Imagine a big company that makes jeans. The cost of labor and materials is, let’s say, $6.00. But the company expenses, including its tax burden, have to be added to that cost; otherwise the company would go under. Same with its regional distributors and wholesalers. Every step of the journey from the cutting room to retail store adds additional taxes, plus expenses, plus a profit margin. The result is that you pay $49.50 for a pair of six dollar jeans.
A simpler example: you rent your digs from a landlord. De Jure (by law), your landlord pays property tax. But de facto (in reality), the property tax is added to your rent. So here’s what you need to understand: Taxes flow downhill. Ergo, every tax is a consumer tax!
Once you grasp these facts, it’s obvious that when you reduce corporate taxes to, say, 21%, several good things occur. The least of which is you’re likely to pay a little less for the jeans. Yeah, the company might be stupid enough to pass its tax savings to shareholders. But doing so risks getting undersold by the competition. Plus, this kind of corporate idiocy is an advertisement for socialism.
A greater boon to the US economy results when our companies become more competitive in the world marketplace. Even if US firms build factories overseas, their profits from world trade eventually end up over here. And more foreign companies will invest in the US market. That’s more wealth coming into the US, and more money spent here. Jobs. Wealth. Boom City.