Reports Expose Deep Harms of Corporate Tax Cuts and ‘Trickle Down’ Ideology

COMMON DREAMS, Jake Johnson, January 23, 2024 

“Failing to reimagine a more ambitious and comprehensive use of corporate tax policy prevents us from achieving a more equitable, sustainable, and democratic economy.”

Two new reports published Tuesday by the Roosevelt Institute argue that robust corporate taxation is key to creating a strong economy and improving the well-being of families and children—objectives that have been undermined in the decades since the Reagan era by regressive tax cuts enacted on the false premise that benefits would “trickle down” to the rest of society.

The first report, A Mapping of the Full Potential of U.S. Corporate Taxation to Enhance Child and Family Well-Being, examines what the authors describe as the understudied notion that “increasing corporate taxation will necessarily help children and families by providing additional revenue for essential public services.”

That perspective runs counter to what the Roosevelt Institute’s second report calls “a ‘cut-to-grow’ mentality” that rose to prominence in the 1970s and was enthusiastically embraced by the administration of President Ronald Reagan.

“Under this view, the thinking went, it was necessary to reduce the corporate tax rate to grow the economy—and that this growth would allow gains to eventually ‘trickle down’ from the rich shareholders to the middle class,” the report states. “During this time, the corporate tax rate was gradually reduced to 35% before it was dramatically cut to 21% in 2017. These cuts resulted in corporate tax revenues falling to less than 10% of total federal revenues.”

“Perhaps more than any other, President Ronald Reagan leveraged mounting backlash to taxation and government spending to dramatically reduce both, regardless of the consequences to American families,” the report observes.

“Corporate tax policy since Reagan has been driven by the trickle-down economics narrative that cutting the taxes on ‘job creators’ will benefit less wealthy U.S. taxpayers.”

The decades-long decline in corporate tax rates has severely undermined the federal government’s ability to finance critical public goods, from education to childcare.

“Since regressive corporate tax cuts don’t significantly increase earnings for working families (through either wage or employment increases), but they do reduce the government’s ability to fund family income and care supports, childcare costs—which are already rising—can become a relatively more expensive line item in working parents’ household budgets,” reads the Roosevelt Institute’s first report, authored by Emily DiVito and Niko Lusiani.

“When they can’t afford childcare,” they added, “parents face the difficult choice of having to cut costs in other places—often on the basic necessities that allow children to thrive, like food, clothing, and enrichment activities—or taking on additional caregiving duties themselves.”