Thread by @MichaelSLinden

By now, most Americans know this tax bill is terrible. We know it's unfair, it's a giveaway to the rich, it cuts health care & puts other services at risk.

What hasn’t sunk in yet is how it could also harm the economy, costing jobs and prosperity.

I count at least 5 ways. 1/

First and most directly, by cutting taxes on the super-rich and asking everyone else to pick up the tab, this bill will exacerbate our already sky-high levels of income inequality, as @DLeonhardt correctly points out. 2/
nytimes.com/2017/12/17/opi…

Beyond being morally repugnant, increasing our income inequality will also cause the economy to grow more slowly and will result in more fragile growth, bringing recessions on more rapidly. 3/ imf.org/external/pubs/…

Second, by cutting both top personal income taxes and corporate taxes, this bill
dramatically increases the incentives for corporate CEOs and major shareholders to hoard profits rather than invest them. 4/

We know that when taxes for the rich go down, CEO pay goes up. That’s because corporate executives have a huge incentive to bargain for an even bigger slice of the pie when the taxes on their slice just shrank. 5/
nber.org/papers/w17616.…

Once the corporate execs take their cut, then the major shareholders take theirs. We’ve known for some time now that when corporations get more $$ they use it to buy back stocks and increase dividend payouts. 6/
rooseveltinstitute.org/wp-content/upl…

Think about what that means: it’s not just that CEOs & shareholders are enriched directly by the tax cuts. It’s also that they respond to the new incentives by TAKING EVEN MORE, which leaves even less for workers, down-stream suppliers, and investments in the future. 7/

The cruel irony of “trickle down” is that the lie at its heart is not only that nothing actually trickles down, but that, in fact, income and wealth gets vacuumed up. 8/

Third, to the extent that we have still not fully recovered from the Great Recession, the underlying weakness is one of DEMAND not supply. There aren’t enough customers with enough $ in their pockets to spur faster growth. 9/ rooseveltinstitute.org/wp-content/upl…

Giving tax cuts to the “supply side” won’t solve that problem & the tax cuts that do go to low & moderate-income families are small, temporary, and are likely to be offset by service and benefit cuts. 10/

In fact, after accounting for all the implicit spending cuts in the tax bill, the vast majority of moderate and low-income families lose out, even in the first year. That’s no way to boost aggregate demand. 11/
rooseveltinstitute.org/who-really-pay…

Fourth, the tax bill encourages more offshoring of both profits AND operations, as @GeneBSperling explains. The bill sets up 2 corporate tax rates: a higher one for home and a lower one – full of loopholes – for abroad. 12/ theatlantic.com/business/archi…

Finally, this tax bill is incredibly distortionary. Conservatives used to be the ones to complain about the tax code picking “winners and losers,” but that’s exactly what happens here. Different kinds of income are treated differently. 13/

Overseas corporate income does better than domestic corporate income. Corporate income does better than small business income. Owner income does better than worker income. Inherited income does better than basically everything. 14/

And we haven’t even begun to find all of the loopholes, mistakes, and other weird quirks that will result in strange tax avoidance strategies. @DavidCKamin @LilyBatch and co-authors have found a bunch already. 15/
papers.ssrn.com/sol3/papers.cf…

What will definitely happen is that people & businesses will make decisions based on tax planning (even more than now), not based on underlying economic imperatives or incentives and that will act like sand in the gears of the economy. 16/

There you go. 5 ways the tax bill is terrible for the economy, beyond its unfairness & cruelty:

1.↑ inequality = ↓ growth
2.↑ incentive for CEO & Shareholder hoarding
3.Aggregate demand ↓
4.Offshoring ↑
5.Economic distortions ↑

/17

Just like the tax cuts in Kansas failed to produce the promised economic boost, this tax bill is going to further skew the economy in favor of those who already have the most, while leaving everyone else behind. As if you needed another reason to hate this bill. /end