If you remember the movie “Animal House,” you remember Bluto — John Belushi’s character. In one scene, he exhorts his glum fraternity pals. He gives an emotional and rousing pep talk — ordering them to follow him. He flings his fist in the air, rends the air with a banshee rallying cry, and charges out […]
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If you remember the movie “Animal House,” you remember Bluto — John Belushi’s character. In one scene, he exhorts his glum fraternity pals.
He gives an emotional and rousing pep talk — ordering them to follow him. He flings his fist in the air, rends the air with a banshee rallying cry, and charges out of the room.
Yet, nobody stirs.
Okay, here is a rallying cry: Let’s cut taxes on big business. Let’s cut taxes on small business. Slash them big time. Hurrahs all around. All in favor raise your … I said all in favor … Wait a minute. Hello, hello. Is anybody awake out there?
Nobody is much interested. Well, a few business people are interested, as are some diehard free marketers. All those filthy capitalists, they like the idea. But the good ole suffering folks in the middle class? Nah.
Here is why they don’t like the idea of cutting business taxes. And here is why they should love it.
They don’t like it because median family income in the U.S. is the same as it was in 2000. The average family has seen no gains. The average worker and family are treading water. They figure they are not gaining, so why give a break to business?
You can fling buckets of figures at them. They don’t care. Look at this trend line. Look how savage the recession was. Blah, blah, blah. Their answer is: We are treading water; we’re the ones who need the tax cut.
Here is why middle-class workers should love the idea of a tax cut for business. It is a tax cut for them and a chance for a raise. How can this be? It is because companies don’t pay taxes. Employees and customers pay them. They pay the taxes levied on businesses.
How do they pay them? Companies simply pass tax costs on in several ways: by holding a lid on salaries, trimming benefits, hiring fewer people, or by laying off more. Or the businesses raise prices or cut services.
It truly is as simple as that. Imagine a grocery store in your town. Tonight, the city council levies a 10 percent tax on all the profits for the store. That store will stay open all night, so that workers can raise the prices on every item before morning.
So theoretically, the store pays the tax. But in reality, you the customer pay it. And you the employee pay it, when the store cuts your hours. It trims your hours because the higher prices slow down sales.
You probably know Larry Kudlow from TV or radio. Or, you read his columns. When it comes to our economy, Kudlow is as clear-headed as you will find. He says our middle class has suffered because our economy grows too slowly.
Since 2000, the economy has averaged 2 percent growth per year. That’s not nearly enough. From 1950 to 2000, the economy averaged 3.5 percent growth. If the economy had grown at 3.5 percent annually over the last 14 years, the average household income would have soared — instead of soured.
To Kudlow, the solution is simple: Cut corporate taxes to 15 percent. For large and small businesses. Let companies deduct right away every penny they invest for growth. (They currently have to spread the deduction over many years.) And let’s cut taxes on the profits that companies stash overseas. — to make it easy for them to bring the money back to the U.S.
Kudlow argues that this will stimulate the economy more than anything else. I believe he is right — because it is a middle-class tax cut, as I discussed above.
The economy needs to grow more rapidly to help the middle class. Folks in the middle class need such a tax cut for business — whether or not they realize it directly helps them.
When companies pay taxes, it is we who pay them — through higher prices and lower pay and benefits. When companies get tax cuts it is we who get them — through lower prices and more pay and benefits. And through companies expanding.
The time is ripe for tax cuts for business. Because those cuts are for us.
From Tom...as in Morgan.
Tom Morgan writes about political, financial and other subjects from his home near Oneonta. Several upstate radio stations carry his daily commentary, Tom Morgan’s Money Talk. Contact him at tomasinmorgan@yahoo.com
