GOP faith based ‘trickle-down’ tax theory exposed as a lie, part the infinity

President Trump cites massive tax cuts, his signature legislative achievement (sic), among wins that should dissuade voters from supporting his impeachment, and supporting his reelection.

But several conservative economists now say the Trump tax law, which turns two years old Sunday, so far has fallen short of its central promise to spread prosperity broadly — just as Democrats rightly predicted. Conservative economists say Trump’s promises about his tax cuts did not come true:

“I was certainly expecting to see something different,” Alan Viard, an economist with the right-leaning American Enterprise Institute, says of a business investment boom that hasn’t materialized. “Really, you would have expected, if there’s an effect taking place here, you would have seen it.”

[I]nstead, business investment has contracted over the past two quarters, falling 3 percent over the three-month period that ended in September — the steepest such drop since 2015.

Economists surveyed by the Wall Street Journal named the development as a top disappointment this year.

[T]he numbers speak for themselves. “We haven’t seen a huge investment boom. That was validating for a lot of folks on the center-left,” says Garrett Watson of the Tax Foundation. “That’s just an accurate description of where we are.”

[E]conomists critical of the law say the results make clear that theory behind the tax cuts was fundamentally broken from the start. “There’s just no shortage of business capital. You can see that by looking at interest rates,” says Edward Kleinbard, a former chief of staff of the congressional Joint Committee on Taxation, now a professor at the University of Southern California Gould School of Law. “In a world where we are awash in capital, to say we now have a tax environment that’s friendlier to business investment is no more convincing than pushing on a string.”

Whatever the combination of reasons, polls show the tax cuts have remained broadly unpopular with voters. And the package does not appear to be improving with age. 

A new report by the left-leaning Institute on Taxation and Economic Policy found 91 corporations in the Fortune 500 paid no federal taxes last year. And about 400 of the largest firms paid an average tax rate of 11 percent, half the burden prescribed by the tax law.

“Many companies said a big drop in corporate tax rates would allow them to invest more in capital and equipment, but the uptick in new investment appears to have been short-lived,” my colleagues Jeff Stein and Christopher Ingraham wrote recently. “Much of the extra capital went into record stock buybacks, which increase share prices without requiring new investment or hiring.”

Greg Sargent writes at The Post that this new report hands Democrats a major weapon against Trump:

There is probably no more glaring example of President Trump’s massive betrayal of the economic populist nationalism that infused his campaign than the 2017 tax law. It isn’t just that he signed a massive tax cut that showered most of its benefits on the very highest earners after vowing to take on financial elites.

It’s also that in so doing, Trump fully embraced conventional GOP plutocracy after strongly suggesting that he was decidedly not a Paul Ryan-style Republican, vowing major public spending on infrastructure, universal health care and a strong stance in defense of social insurance.

Now a new report underscores yet another way in which Trump’s tax law represents a profound betrayal of that spirit. And it gives Democrats a new opportunity to undercut Trump’s populist aura, or whatever is left of it, anyway. Jeff Stein and Christopher Ingraham report:

About 400 of America’s largest corporations paid an average federal tax rate of about 11 percent on their profits last year, roughly half the official rate established under President Trump’s 2017 tax law, according to a report released Monday.

The 2017 tax law lowered the U.S. corporate tax rate from 35 percent to 21 percent, but in practice large companies often pay far less than that because of deductions, tax breaks and other loopholes.

In the first year of the law, the amount corporations paid in federal taxes on their incomes — their “effective rate” — was 11.3 percent on average, possibly its lowest level in more than three decades, according to a report by the Institute on Taxation and Economic Policy, a left-leaning think tank.

From 2008 to 2015, under the previous tax code, the corporations’ effective rate was about 21 percent, according to ITEP’s prior research.

There’s also this, from Stein and Ingraham:

The report also found that 91 corporations in the Fortune 500, many worth billions of dollars, paid no federal taxes last year.

Even before this new report came along, we already knew the tax law had failed to achieve its stated objective of producing an explosion in job-creating corporate investment. As Stein and Ingraham note: “Much of the extra capital went into record stock buybacks, which increase share prices without requiring new investment or hiring.”

What appears new here is that the report also found that the tax law ended up facilitating tax avoidance. As the report puts it:

For most of these companies, their effective federal income tax rate was much lower than the statutory corporate tax rate of 21 percent. This is by design.

When drafting the tax law, lawmakers could have eliminated special breaks and loopholes in the corporate tax to offset the cost of reducing the statutory rate. Instead, the new law introduced many new breaks and loopholes, though it eliminated some old ones.

What did these new tax breaks and loopholes do? The report says:

Several breaks and loopholes allow companies to report taxable income that is much smaller than their actual income. Other special breaks allow companies to reduce their tax liability after they apply the rate to their taxable income.

It’s often been observed that Trump’s tax law was not tax reform; it was largely a tax cut. This underscores the point and makes it even worse. The report is unsparing on why the law ended up introducing new tax breaks and loopholes facilitating tax avoidance, chalking it up as “the result of a long-term aggressive push by corporate lobbyists to reduce the federal corporate income taxes their companies pay.”

Swamp, decidedly not drained.

This gives Democrats a major opening, not just to promise to undo Trump’s regressive tax cuts and campaign for a more progressive tax code — something that Sens. Elizabeth Warren (D-Mass.) and Bernie Sanders (I-Vt.) have done most ambitiously, though Joe Biden has been surprisingly good on this as well — but also to vow to genuinely drain the swamp, from a tax-fairness perspective.

Crucially, this comes as Trump has appealed to the Supreme Court to protect him from seeing his own tax returns and finances revealed to the public. Taken together, all these things dramatically escalate the betrayal we’ve seen.

Let’s hope the Democratic candidates drive these points home in tonight’s debate.