The Trump tax cut had two primary purposes: 1) political: to make Trump seem like he is “pro-business”, and 2) economic: to give free help to already overvalued stock portfolios, to delay the collapse of the current bubble.
The single most salient fact about the Trump tax cut was largely ignored by those who passed it: That it would make life much less affordable for most people in the United States. How? By undermining the quality and value of service funded by taxpayer money, on which everyone in the economy depends, and delivering money from most taxpayers directly into the pockets of people who can use it to pay for high-priced private services that help them overcome the spreading socio-economic and infrastructure deficits affecting everyone else.
The Trump tax cuts not only shifted cash and additional marginal new income to the already ultra-wealthy; they also shifted macro-economic efficiencies, deepening structural biases that could undermine the Middle Class for generations, if not corrected.
Purpose 1—to make Trump seem pro-business—was a dangerous deception, because he is terrible at business, economics and finance, and because he actively works to undermine the foundations of value for the whole economy. Purpose 2—to give free money to the already wealthy—was a dangerous tactical error, because it has the effect not of incentivizing investment but of incentivizing the hoarding of cash, and so will ultimately be one of the contributing factors to the coming recession.
Take these together with the fact that the stock market is growing—based largely on capital-to-capital wealth transfers and not on real on-the-ground investment in people, communities, new game-changing products or better business models—and we face a steadily mounting crisis of the same kind we faced from 2005 to 2008, where accumulating reported value was actually becoming increasingly fictional. That fictitious sum total of new wealth effectively becomes a hole that needs to be filled to prevent total collapse—hence: TARP, QE and the lingering negative interest rates problem.
11 years after the crash of 2008, we have still not filled in the hole created by the subprime mortgage derivatives racket, and yet we are witnessing in real time another attempt at the same failed scheme.
The US urgently needs an alternative minimum corporate tax—to ensure corporations that work the existing system to pay zero in taxes do actually support the wider wellbeing of society. Perhaps more importantly, the US also needs a phased income-building tax-shift—to create incentives for capital to move into activities that generate higher incomes for ordinary people.
We need proposals that would help the US economy move to a more future-oriented energy system, decentralize both energy production and wealth creation, shift new income back to rewarding people for work, and improve the overall resilience of households, communities, small businesses, and the macroeconomy.