By Dave Lindorff
There is a Big Lie underlying the $1.5-trillion Trump/Republican Congressional tax bill. That lie — the kind that is so brazen its purveyors hope it will simply be accepted as truth — is that when corporations get their big tax break, they will pass much of it on to workers in the form of higher wages, and perhaps to consumers in the form of lower prices.
How do I know it’s a Big Lie? Basic economics and history.
Let’s take care of the consumer economics argument first. Prices in the US, at least in those parts of the economy that are still competitive, are based on the law of supply and demand. Anyone selling a product or service will charge a price that maximizes profits, and that price is determined by buyer demand. Up and down the chain from suppliers to manufacturers to distributors to retailers, this system works itself into the final product offered to consumers. At no point in that chain does management say, “Hey, we’re paying lower taxes this year. We should cut the price on our widgets and pass the benefits along.” Why would they? They’ve already learned what customers are willing to pay for their widgets, and know the magic point where a higher price starts to reduce demand to the point that it is counter-productive, and they’ve also learned how much cutting the price will increase sales and where further cuts just mean selling the same number of widgets but at a lower price. And those two boundary points don’t change just because taxes — a cost of doing business — get lower. Far better to pocket that extra money for the benefit of management or for the shareholders.
But what about wages? There’s this faery tale being told by Republicans and by President Trump (a businessman known for being tight-assed when it comes to paying staff, and even for stiffing people whenever possible, besides for grabbing pussy when available) that if businesses got a big tax break, they’d use at least some of it to offer their employees higher wages.
Does anyone really believe that? If that were the case, why would the corporate world and outfits like the US Chamber of Commerce be fighting tooth and nail as they have been against every effort in cities and states across the country, and in Congress, to raise in the pathetic $7.25/hour minimum wage (a wage that has not gone up since back in 2009 at the depths of the Great Recession!)? The truth is corporate America loves the starvation level of the minimum wage because they use various taxpayer-funded welfare programs — Aid to Families with Dependent Children, Food Stamps, WIC and the like — to actually subsidize their workforce for them so they don’t need to offer workers a living wage…
For the rest of this article by DAVE LINDORFF in ThisCantBeHappening!, the uncompromised, collectively run, six-time Project Censored Award-winning online alternative news site, please go to: www.thiscantbehappening.net/node/3741