In 1972 James Brown came out with the hit single “Talkin’ Loud and Sayin’ Nothing,” (aptly covered, for the record, by Living Colour in 1991). Its difficult to get that title’s key refrain out of my head every time I read painfully misdirected and downright ignorant criticism about the newly enacted Tax Cuts and Jobs Act (TCJA).
Often, this shameful rhetoric seems to come from the mouths of Senators Elizabeth Warren and Chuck Schumer.
While I was initially skeptical of the early versions of the bill, especially in regard to the heavy tax burdens it was going to place on graduate students and higher education, I have come around to believe that the final version of the law will be beneficial for the overwhelming majority of Americans across the board and not just “the wealthy.”
Let’s look at three of the key reasons why:
Small business growth and entrepreneurship will likely accelerate.
The Obama years were not particularly beneficial to small business. And while President Obama did indeed inherit a mess from disastrous legislation and crony capitalism stemming from both sides of the aisle, his shameful attitude towards small business (let’s not forget his baffling “You didn’t build that!” quote) and primary focus on social engineering and “social justice” gave Americans an anemic level of economic growth over eight years. The TCJA helps many small business owners get their firms off the ground by taxing them at a substantially lower rate than before. Let’s not forget that businesses often don’t grow overnight and the early years of a startup starting operations might mean working, literally, 365 days a year (as my small-business owner wife did while raising our children) for very little revenue. This tax rate reduction will be especially helpful in states with high tax burdens such as New York and California where an annual income of $150,000 doesn’t go very far and hardly gives a family a Kardashian-style lifestyle. In fact, in New York City, $150,000 doesn’t even allow a family to enjoy a Conner-style lifestyle from the show “Roseanne.” Eat-in kitchen in New York City on $150,000 per year? Keep dreaming – like Roseanne’s final season.
What will my wife do now with her additional proceeds that no longer go to the IRS? Summer camp for the kids, after school gymnastics lessons, and maybe some new kitchen countertops. In other words, putting money right back into the economy… the local economy no less.
Publicly-traded firms will see an increase in the ability to pay dividends and reinvest in their operations.
On December 19, Senate Majority Leader Chuck Schumer said” “This tax bill will be an anchor around the ankles of every Republican.” If he meant, “anchoring in solid strategies for business growth,” then he’s absolutely correct. Of course, Senator Schumer has little understanding of how an economy grows so it’s likely he meant something entirely different in some sort of partisan jab that he ultimately won’t be held accountable for.
While many kneejerk reactions about lower tax rates for corporations have been oddly met with tired refrains of “tax cuts for the wealthy” and “a gift to Wall Street,” we need to step in closer and really see what’s happening here. Publicly traded firms have to answer to shareholders. Ultimately, the majority of equities investors are going to buy and sell stocks based on a few key factors such as the ability to generate earnings (often paid out to shareholders in the form of dividends), the prospects of future growth (and thus, future earnings paid out to shareholders as dividends) and growth in the operations of the firm itself (often reflected in a higher stock price over the years). Even the most passive investors can likely benefit a great deal by holding stocks of successful, profitable firms as they enjoy a monthly dividend check during their retirement or watch their equity investment increase in value over time.
Now, are there crony capitalists out there working in tandem with corrupt policymakers and insiders who illicitly game and abuse the system? Unfortunately, there are and there always will be. In some cases, these individuals go to prison (Michael Milken, Dennis Kozlowski) and sometimes they get away with their thievery. To simply blame this on capitalism, however, is foolish and tired as one only needs to see the lavish lifestyle the red bourgeoisie lives in their so-called Marxist utopian paradises. Forbes magazine once estimated Fidel Castro’s net worth at $900 million dollars. Josef Stalin, like many leaders of the Soviet Union, led a shamefully luxurious lifestyle as his own people literally starved to death. The Daily Mail has reported that Venezuelan leader Hugo Chavez died with a net worth of $1 billion. Last month the New York Times reported that record numbers of Venezuelan children are suffering from malnutrition and babies are dying at a rapid pace because of a severe lack of available infant formula, even in hospitals.
Pension Plans Have All But Disappeared and Have Been Replaced by 401k Plans
I’m not about to argue that the demise of pension plans is a good thing, because it isn’t, however, this is the reality that almost all American workers under the age of 60 face. The pension plan, with the exception of some public sector employees, is going to be extinct. The alternative is the self-directed retirement savings plan like the 401k or the IRA. These plans will be the bedrock for the overwhelming majority of Americans beginning with Generation X. While investors can often invest in a variety of assets with variable risks in their self-directed plans there is no doubt that investment in equities is at the forefront. And while, in the short-term, stocks can fluctuate, over time, investing in equities over the long-term will often yield sizable returns. Almost every 401k plan has a fund indexed to the S&P 500 or larger indices and the value of these funds are entirely dependent on the growth, dividends and overall success of the firms traded within these funds. Who owns these funds by the way – is it just wall street bigwigs and fat cats? Not even close. These funds are widely held by your teachers, doctors, construction workers, office employees and even convenience store workers. Lower tax rates for corporations mean more firm earnings inevitably go to these investors through increased reinvestment and increased earnings payout.
These are merely three reasons why TCJA will benefit the vast majority of American workers. The bill, of course, does much more that will also allow domestic firms to be much more competitive in the global marketplace.
So when Elizabeth Warren makes another outlandish statement to attempt to agitate her base with more class warfare rhetoric like “the GOP tax bill is for the rich and no one else” as she told Vice magazine on December 19, 2017, I guess we can give her the benefit of the doubt and infer that she believes nearly all working Americans are rich — or she’s simply, yet again, talkin’ loud and sayin’ nothing.
Jeffrey S. Podoshen is associate professor of business, organizations and society at Franklin and Marshall College in Lancaster, Pennsylvania.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of The Daily Caller.