How would you like it if I gave you $4,000? Sounds good, right? Now how about if I told you I want to give you $4,000, but instead of giving it to you I'm actually going to give a whole lot of money (way more than $4,000, let me tell you) to a bunch of corporations that are already making near-record profits? And then when you ask, "Hey, where's my $4,000?", I'll say, "Oh, you'll get it. Someday."
That's the bait-and-switch Republicans are trying to pull right now. They've decided that if they just repeat the number "$4,000" over and over, they can get the public to sign on to a corporate tax cut that will — and you might want to brace yourself for some bad news — not actually give you $4,000.
This is a variation on a routine we go through whenever Republicans propose a tax cut. It will be radically skewed toward the wealthy and corporations, because that's how they roll. But in order to sell it, they'll have to convince people that the true purpose is to help out the little guy, the common man, the working-class Joe with grime under his fingernails and an immovable faith in the American Dream.
So this time, they've decided to get specific. One of the cornerstones of the plan they're now putting together is a dramatic cut in the corporate tax rate, from its current 35 percent down to 20 percent. That might sound like a big giveaway to corporations, which are making enormous profits and aren't exactly starving for cash. But no, says Kevin Hassett, the chair of the Council of Economic Advisers. Hassett claims that once corporations get their hands on that cash, they'll shower it on their employees and create more jobs, boosting every family's take-home pay by that magical $4,000. And it could be even more, he says.
If you've heard of Hassett, it's probably because he was the co-author of the bestselling 1999 book Dow 36,000, which predicted that the Dow Jones Industrial Average, at the time well below 15,000, would reach that level in just a few short years. Needless to say, it didn't, and never even came close (it's around 23,000 today). This failed prediction didn't dim enthusiasm for Hassett's ideas in conservative circles, however. And what has been the reaction to Hassett's $4,000 claim from economists? "I have no idea what the hell he's talking about," said one, capturing the general response.
The truth is that corporations are not dying for extra cash; what keeps them from investing more is limited demand for their products. And while there's a good argument to be made for simplifying the tax code by bringing down the corporate rate while eliminating all the loopholes and deductions they take advantage of, that would leave them paying about the same as they do now. More importantly, when you cut taxes on corporations, the people who benefit the most aren't employees, they're stockholders. That's who gets the windfall. Not only that, according to Steven Rosenthal of the Tax Policy Center, but about 35 percent of U.S. stocks are held by foreign investors. So they'd make out very nicely.
The White House and congressional Republicans understand that all that wonky stuff is just too complicated for most people to grasp. The idea of getting $4,000 you weren't expecting, however, is easy. So they'll just keep saying it. The number keeps popping up, in speeches President Trump makes, in comments by members of Congress, and in places like this:
Now let me offer a crazy idea. If the administration really wanted to give every American family $4,000, they could — stay with me here — give every American family $4,000.
There are 125 million households in the country, which means it would cost $500 billion to do so. That's a lot of money, but the cost of the cut in corporate taxes over the next decade is over three times as high — $1.8 trillion, according to the Tax Policy Center. So if getting that $4,000 into the hands of American families were really the goal, there's a much simpler way to do it than to give it to corporations and hope that eventually it trickles its way back down to the rest of us.
There are reasons why the government might not want to just write everyone a check, but this is a way of demonstrating how absurd it is that the administration is trying to sell its corporate tax cut as a boon to ordinary people — even if it worked, which it almost certainly won't.
Republicans know that they don't have to prove that every family will actually get $4,000 from a corporate tax cut, and it doesn't really matter how fanciful the idea is. They don't even have to convince everyone it's true. All they need is to tamp down potential opposition enough to allow their members to vote for the tax cut without being overly worried that they'll be tarred as advocates for the wealthy. Having a specific number helps: When your congressman is running for re-election next year and his opponent says, "You voted for tax cuts for the rich!" he'll reply, "No, I voted for tax cuts that will give every American family $4,000." It almost sounds like it might be true.
And when it turns out to be as bogus as the rest of the claims they're making about taxes? By then, they hope, we all will have forgotten about it and moved on. And they might be right.