Corporate Taxes Most Hurt Lower and Middle Earner Families.

We are bombarded by the arguments that those greedy corporations are not paying their fair share, that we must raise taxes on them. That this huge company paid no taxes and we need to do something about that. It is one of the most popular arguments by politicians playing their favorite card of class envy and jealousy of one group of people against another. They promise if you vote for them that they will stick it to these big rich companies who aren't paying their fair share. It plays to our most base and dark human emotions so it is very effective. Furthermore, very few people in this country have had more than a semester of economics or civics in their lives, if that much, so really have very little understanding of either. This makes it even easier for politicians and their friends in the media to play to our emotions not our minds.

What are the realities of Corporate Taxes? First of all, corporations don't actually pay taxes, small businesses do, but not the large corporations the politicians sell you they are going to get them to pay their fair share. Corporations only collect taxes for the government from their consumers through their price of the products and services. They must make a net profit to sustain their company, their stockholders, etc. They figure in the taxes they will pay into the pricing structure, so you actually pay it. This has a disparate impact on the lower and middle income earners in this country, because they spend a much higher percentage of their incomes on consumer goods and services than do the highest income or wealthy. Thus any Corporate tax has the biggest tax increase on the lower and middle income earners in America, conversely lowering it benefits them the most. Maybe not immediately, why would a company lower its pricing if people are willing to pay it, until forced to by their competition? However, that money becomes a larger profit for the company, is reinvested in future growth, lower pricing on products, and more labor. The more demand on labor the upward demand on wages. So the people who vote to tax companies are voting to tax themselves and to reduce their wages.

We are seeing those results right now, if we but look for them. Under President Trump, the reduction of corporate taxes from 35%, the highest in the developed world, to 21%, This has caused a tsunami of billions if not trillions that companies were storing off shore back to being repatriated into our economy at home. We are seeing companies moving manufacturing back like we haven't seen in any of our lifetimes. What we were told could never happen seems to be happening monthly as manufacturing is coming back, investment in America is coming back. We have the best economy for any and all demographic group in decades if not historically. And keep in mind it's VERY early in the process, it has only been in place not yet two years. Those factories, those expansions of existing facilities are yet under construction and haven't started hiring to fill them yet. This is the beginning of an economic juggernaut like we have never seen. However, we can look to the not too distant past to see the science behind such an expansion.

The Media, the political left, and frankly the Establishment Republicans all tout Keynesian economic models in their view of the world. Unfortunately, the Keynesian model has yet to actually work anywhere in the world. For centuries economists from Adam Smith, to Karl Marx to John Keynes, while their methodologies differed, shared some things in common. They all based their views on how society uses and distributes "scarce" resources. Ronald Reagan and his supply side economic model, showed us that those long standing theories were flawed by the long-term economic growth during the use of supply side until it was cast aside for the old models once again and the drying up of the economy. In 1981, pushed by newly elected President Reagan Congress passed ERTA, The Economic Recovery Tax Act, which dramatically lowered tax rates and provided incentives to businesses that purchased new equipment. The idea behind this was that the increased work incentive resulting from lower tax rates would lead to increased economic activity, which in turn would more than offset the reduction of federal revenue that tax cuts might normally be expected to produce. All the traditional economists predicted disaster and economic collapse. They were all wrong.

Late in 1982 the GNP began a meteoric rise that initially outstripped even the most optimistic projections by the supply-siders. Many began predicting that unless the spiraling budget deficit could somehow be checked, the nation would face severe inflation, escalating interest rates, and economic stagnation. The economy however, paid no attention to such warnings. From 1985 to 1988, the budget deficit continued to increase. Yet despite dire predictions to the contrary, GNP continued to grow unabated. By 1989 most economists, ignoring their earlier concerns, were expecting the economy to continue its climb well into the 1990's, although they were unable to support their projections with a specific explanation or theory. Clearly something was going on that no one was able to explain. It was, in fact Alchemy at work.

The expansion of the past decade had its genesis in 1946, when the first electronic computer, known as ENIAC, was developed at the University of Pennsylvania. Over the next thirty-five years, even though computers became smaller, faster, more powerful, and easier to use, their use remained generally restricted to the sterile carefully guarded data-processing centers of universities, government agencies and large corporations. By 1981, the computer had evolved to the point where it was ready to burst out into the wider world, onto the factory floor, inside the automobile, and onto the supermarket checkout counter. Serendipitously the Reagan Economic Recovery Tax Act came to be at that moment.

The tax incentives that ERTA gave businesses in 1981 - in effect, a government subsidy amounting to 58 percent of the cost of new equipment - virtually forced corporate America to retool. This greatly accelerated the integration of the computer throughout the economy, dramatically increasing productivity and growth in implemented technology, on a scale not seen since the dawn of the industrial revolution. The impact of these massive productivity increases were both immediate and profound. By significantly lowering the production cost of virtually all goods and services, they reduced inflation. In addition, by swelling corporate profits, they effectively expanded the supply of capital, which in turn kept interest rates down. As well as they gave the United States eight years of unprecedented economic growth. In fact, the effect of this technological change on inflation, interest rates, and GNP has been so significant that it has compensated for the continuing growth of the federal budget deficit.

The reason for this impressive growth had to do with the technology gap. When traditional economists talk about a technology gap, they are generally referring to the disparity of technological sophistication between one country and another, or the industrialized nations and the Third World. However an Alchemic view of the technology gap is not between countries, but between technology currently available and any less-advanced technology actually in use. The size of that technology gap, that amount between what is available and what is being used, is the greatest determinant of economic growth. Our current technology gap is as wide as ever in history, so the future is very bright the more we reduce that gap.

As we reduce the burden on American businesses, we increase their incentive to grow and increase their profits, not find ways to shelter those they already have. This causes them to reinvest in ways to continue to make them more and more competitive. So that money that would have been taken out of the private sector into the public where no growth of wealth every has or can happen, it lights a fire on the economy in the private sector. This is where capital comes from, where wealth is built, were jobs are created, where wages grow as companies trying to grow must compete for the labor force. This is how the wealth of a nation and all of its people come from.