Why Trump's Tax Plan is so very bad. By Eric Keller

 Source: Bureau of Economic Analysis

Source: Bureau of Economic Analysis

Trump's tax plan, created and nurtured by the Republican Party's donor class, mainly cuts taxes for corporations through various mechanisms.  The key question is why.  The chart above shows that, other than mining, profits are stable or rising for most industries.  Also note the rise of manufacturing profits over the Obama years which undercuts Trump's claim the tax cuts are needed to create jobs, etc.  They aren't.

 Source: Bureau of Economic Analysis

Source: Bureau of Economic Analysis

This shows the wages/compensation of all employees. It shows a slight rise except for manufacturing, information technology (think Google), and finance/insurance.  Now this includes everyone from CEO to floor sweeper so there is a bias due to the CEO compensation dragging the average up.  This shows the need for wage increases, especially in Retail.  So Trump's tax plan would do better by giving incentives for that rather than just giving money to corporations.

net corportate dividends by industry 2009 2016.png
undistributed profits by industry 2009 to 2016.png

The two charts above show where the profits are going.  They are hard to read- but the top is when they create dividends for shareholders and the bottom is when they keep the profits.  Undistributed profits means they are not plowing them into productivity or wages, but holding on to the capital.  

All these graphs point to the realization that corporations are flush with capital now, are not raising wages very much, and are not in the position to really need tax cuts.  Manufacturing is the exception since they tend to pay higher wages, keep less capital, and pay less dividends.  This is a good news story with them since manufacturing shows what we hope all sectors will look like.  However, the other sectors clearly are holding on to their capital (profits) other than when they are paying out dividends.  More capital in a corporation means higher stock price (since they are a good risk) so more money for stockholders.  

Finally- to put it all together.  The donor class for the Republican Plutocratic Party are awash in profits, pay little in wages, and now are getting even more with the RPP tax plan.  The people getting hurt are you.  Most of us do not own large amount of stocks (maybe in 401k which is unrealized and thus dividends indirectly go to you).  Most of us will not see that capital tucked away as the charts show.  Most of us have flat wages.  This tax plan hurts you and these charts plainly show one reason why they do.

I realize this is a pretty wonkish blog- but did want to show why I think this tax plan is such an abomination.

Eric KellerComment