Some links related to the effectiveness of tax cuts and income inequality.
The basic point: There have been huge changes in taxes throughout US history with virtually no observable shift in growth rates.
Details at, Effects of Income Tax Changes on Economic Growth.
First, corporations have reported record profits.
The lack of investment is not due to the lack of funds.
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Second, businesses have been saying to whoever will listen that
it does not plan to invest a windfall from lower taxes.
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There may be other reasons that some may support the corporate tax
cuts, but spurring investment and wage growth are not compelling
or convincing arguments. The kind of investment that may be
more necessary, and can boost wages and productivity is public
investment, but the tax reform proposals will leave little room
for an infrastructure initiative.
John Bussey, an associate editor with the Journal, asks the CEOs in the room, "If the tax reform bill goes through, do you plan to increase investment - your companies' investment - capital investment," and requests a show of hands. Only a few hands go up, leaving Cohn to ask sheepishly, "Why aren't the other hands up?"
Out of 42 top economists, only 1 believes the GOP tax bills would help the economy The first question was straightforward. Would they agree that if the US passed a tax bill "similar to those currently moving through the House and Senate," GDP would be "substantially higher a decade from now"? Of the 42 economists polled, only one thought the Republican bill would boost the economy. The plurality said it wouldn't, and the remainder were uncertain or didn't answer.
An influx of foreign hot money isn't what we need.
The theory was that by making it more lucrative to invest in American businesses, they would boost business investment in the United States -- making our country home to more factories and offices, driving job creation, and pushing up wages.
What happened instead was a weak, highly inegalitarian period of economic growth that was associated with the drift of America's manufacturing base overseas and an unsustainable debt-financed boom in house building.
The top 20% have set things up to guarantee virtually all of those spoils go to their descendants. Where does that leave the rest of us?
The author, economics professor and Brookings Institution fellow
Richard Reeves, notes that while the US has always had a class
system, the upper middle class -- which he defines as those earning
$120,000 a year or more -- is not only widening the gap between
itself and everyone else, but also hoarding opportunities in a way
that makes it difficult for any outsiders to climb up to it. (The 1%
is getting richer even more quickly, of course, but there aren't
enough of them to hoard opportunities on a mass scale.)
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Rampant inequality is not the fault of a class of people doing
exactly what anyone would do in their position, but a political and
economic system that incentivizes and enables them to do so.
(Don't hate the player, hate the game.) It follows that the solution
is not individual and moralistic, but collective and political.
Dispelling misconceptions about what's driving income inequality in the U.S.
Almost all of the growth in top American earners has come from just three economic sectors: professional services, finance and insurance, and health care, groups that tend to benefit from regulatory barriers that shelter them from competition.
The groups that have contributed the most people to the 1 percent since 1980 are: physicians; executives, managers, sales supervisors, and analysts working in the financial sectors; and professional and legal service industry executives, managers, lawyers, consultants and sales representatives.
Without changes in these largely domestic services industries -- finance, health care, the law -- the United States would look like Canada or Germany in terms of its top income shares.