It’s not new and has never really stood up to scrutiny. Yet virtually every single figure who lobbied for corporate tax reform has made a version of this argument. In the past, Congress couldn’t or wouldn’t take up the cause, but, desperate for a political win after the loss on health care, Trump and the GOP leadership ran with a recycled version of this argument, and Congress finally passed the Tax Cuts and Jobs Act on December 22, 2017. The headline feature was a cut in the official corporate tax rate from 35 percent to 21 percent.
So did reality correspond to the theoretical case made for the tax reform bill? We now have enough information to make a reasonably informed assessment. Unless you think that tax havens like Ireland, Bermuda or the Cayman Islands, all of which continue to feature as major foreign holders of U.S. Treasuries, have suddenly emerged as economic superpowers, the more realistic interpretation of the data shows the president’s much-vaunted claims about the tax reform to be bogus on a number of levels. Even though some dollars have been “brought home,” there remain trillions of dollars domiciled in these countries (at least in an accounting sense, which I’ll discuss in a moment). If anything, the key provisions of the new legislation have given even greater incentives for U.S. corporations to shift production abroad, engage in yet more tax avoidance activities and thereby exacerbate prevailing economic inequality. Which, knowing Donald Trump, was probably the whole point in the first place.
View the complete July 20 article by Marshall Auerback on the National Memo website here.