Cutting Taxes For Corporations Does NOT Create Jobs

(This image of corporate greed was found at the website of The Brown Nomad.)

Donald Trump has said that corporations are sitting on trillions of dollars in cash that they have stashed overseas (and refuse to bring it home because they don't want to pay taxes on it). That is true -- and may well be the only true statement he has made since being sworn in last January.

But then he, and his congressional Republican cohorts, depart from reality -- by saying corporations aren't creating jobs because they can't afford it. They say that cutting the corporate tax rate in half (to only 20%), and letting corporations bring back the money earned in other countries at an extremely low tax rate will create a massive number of new jobs. That's a lie!

Corporations are making record profits, and currently paying very little in taxes (an effective rate of only 18.6%, thanks to all the subsidies and loopholes they can take advantage of). Cutting their tax rate to 20%, while letting them keep all of the subsidies and loopholes, will let them pay an effective tax rate far below the current 18% -- maybe even NOTHING (as about a third of corporations already do).

They could use the trillions they are sitting on, whether in this country or stashed abroad, to create those new jobs if they wanted to -- without paying any taxes on the money used for job creation. That's because labor costs are a legitimate deduction, and taxes are only paid on profits (after all legitimate deductions have been subtracted). So, why aren't they already creating that massive number of jobs?

The answer is because they don't need massive amounts of new workers -- and any business man who hires workers he/she doesn't need is just needlessly cutting into his/her own profits. It would be foolish to do that.

There's is only one reason for a business to create new jobs -- if they need new workers to meet an increase in demand for their goods/services. And cutting taxes for corporations (or the rich) will not increase the demand for goods/services. That can only be done by putting money in the hands of the masses (through higher wages or tax cuts for the working and middle classes). The masses create demand when they have more money to spend, and decrease demand when they don't have enough money to meet their needs.

A tax cut could boost the economy and create new jobs, but only if it goes to the working and middle classes. If it goes mainly to corporations and the rich, as the Trump/GOP plan stipulates, demand will not increase and jobs will not be created. The only thing that will happen is the rich and the corporations will be laughing all the way to the bank -- and don't expect any of that money to "trickle-down" in the form of higher wages. That has never happened due to a tax cut in the past, and won't happen this time.

The Trump/GOP tax plan will not be good for this country (or the economy).