By: Ryan Kirby, Columnist
Eight months into his presidency, Donald Trump is still looking for his first major legislative victory. President Trump has decided to move onto tax reform in the hopes of spurring economic growth. This past week, the GOP leadership released its tax plan and it included a tax hike on the rich, closed countless loopholes and provided relief to Americans who are struggling the most. Just kidding! It cuts taxes for the wealthiest Americans, and actually increased the bottom tax rate from 10 percent to 12 percent. Granted that is a highly simplified summary, so I encourage you to look up the actual plan, or at least a news article that provides an in-depth summary and analysis. The main takeaway is that America is potentially going to get another wave of supply-side economics.
Supply-side economics, also known as “trickle-down economics,” has been the dominant economic theory for the Republican party for the past 37 years. This economic theory relies on the idea of giving tax cuts to the wealthy, who will in turn use those additional funds to invest, create jobs or raise wages. As we have seen throughout the past 30 years, that simply does not work. This theory relies heavily on the idea that the wealthy will take the additional money and actually spend it. However, history has shown that instead of spending the money, it is usually saved. When the wealthy get a tax cut and choose to save the money rather than spend it, the middle and lower classes don’t see jobs created, or their wages rise.
The attempt by the Trump administration to give tax cuts to the wealthy has dangerous ramifications for the economy as a whole, but also the average American worker. According to the Economic Policy Institute, between 1973 and 2015 productivity rose 73.4 percent, but hourly compensation only rose 11.1 percent in that same period. American workers have been able to produce more for the economy, but they have not seen their wages rise in correlation with how productive they are. Where is the money going? When you look at the wage growth of the top one percent of Americans, their wages have increased 138 percent since 1973; but when you look at the wage growth for the bottom 90 percent, wages have only risen by 15 percent. This data indicates one of the main failures of supply-side economics, by showing how the wealth was never able to trickle down to the middle-class.
The Republican party is again showing why they’re the party of big business and the ultra wealthy. The plan that the Trump administration is proposing would most likely benefit him personally, although it’s hard to know definitely since he never released his tax returns, and his rich friends. The Democratic party supports tax relief for the middle class, and we would love to work with the Republican party on this issue, but we will not support tax cuts that increases wealth inequality at the expense of the average American.