Rubio Distracts From GOP Tax Cut Success
The Republican senator should spend more time touting how tax cuts help American families.
Republicans are used to economic ignorance spewing from the vapid maws of Democrats. That’s the case whether it was Barack Obama admitting that his promise of “shovel-ready” jobs was a joke after blowing $800 billion on an unstimulating “stimulus,” Nancy Pelosi claiming the way to create 600,000 jobs was to increase unemployment payments and food stamps, or Bernie Sanders lecturing us on how we should emulate socialist Venezuela — a country where people are eating dogs to keep from starving.
However, such ignorance is unexpected coming from a conservative senator who was one of the last standing in a very crowded field of 2016 Republican presidential candidates.
Regarding corporate savings from the GOP tax cuts, Sen. Marco Rubio (R-FL) told The Economist, “There’s no evidence whatsoever that the money’s been massively poured back into the American worker.” He continued, “There is still a lot of thinking on the Right that if big corporations are happy, they’re going to take the money they’re saving and reinvest it in American workers.” Instead, he argues, a “few gave out bonuses,” while the remainder engaged in stock buybacks, increasing the share price for investors.
During negotiations on the tax cut bill, Rubio pushed for a less generous corporate tax cut and an even greater child tax credit, winning a substantial increase. So he’s at least being consistent.
In his interview, Rubio criticized supply-side “Reaganomics,” which reduced tax and regulatory burdens on businesses and unleashed a quarter-century of economic growth, benefitting the vast majority of Americans.
Following the GOP tax cuts, hundreds of businesses announced bonuses and wage increases. Apple alone announced more than $300 million in bonuses to rank-and-file workers, and America’s largest employer, the much-maligned Walmart, raised its minimum wage to $11/hour, a whopping 52% higher than the federal minimum wage.
Rubio contradicts himself by admitting that the tax cuts “make the U.S. economy a more attractive place to do business.” More business means more jobs, which creates a labor demand, which raises wages. More business means economic growth, which means higher tax revenue (because of, not in spite of, the lower rates).
Even his railing against stock buybacks reveals a lack of understanding of how investments work. The tax cuts free up money for corporations to make capital investments, which increases productivity. Increased productivity brings higher wages for workers because workers produce more goods in less time.
There is also the fact that, as the National Taxpayers Union’s Andrew Wilford explains, “Research continues to show that corporations only engage in stock buybacks when opportunities for productive capital investment are exhausted. There is no connection between increases in stock buybacks and decreases in economy-wide investment.”
Additionally, stock buybacks increase the value of the remaining shares. More than half of all Americans own stock directly or through mutual funds, which means their retirement accounts gain value when corporations buy back stock. Is this not a good thing? The National Taxpayers Union Foundation estimates that shareholders (including tens of millions of American workers and retired seniors) will see a 4.32% to 4.95% increase in their portfolios as a direct result of the tax cuts.
In other words, Wilford says, the stock buybacks are “not proof that corporate tax reform is failing to benefit the economy. They’re proof that it is succeeding.”
Whereas workers can see an immediate benefit when they receive a bonus, the greater positive impact will come in the next 18 months to three years as the effects of the tax cuts take hold. Businesses make decisions over a much longer horizon, which is why it was so important to make the corporate tax rate cuts permanent. Businesses would not make major investments based on a tax cut that expired in a year, or two or even five.
It’s hard to tell whether Rubio’s statements are rooted in economic ignorance or political calculus, but either way, they are unhelpful to the Republican Party — a gift that Democrats were quick to exploit.
While President Donald Trump has been wildly successful in slashing regulations, securing the border, nominating conservative jurists to the bench and dealing with foreign adversaries, the Republican Congress, thanks to a handful of turncoat GOP senators (Rubio is not among them), has precious little to brag about besides tax cuts as we go into the midterm elections — elections in which the majority party typically loses seats.
Republicans are banking on Americans seeing the positive impact of the tax cuts in the form of wage increases, bonuses and job creation. Having a well-respected Republican senator torpedo that message is a deeply hurtful, self-inflicted wound. Rubio should be praising the tax cuts, not criticizing them. He took a step toward fixing things and better explaining himself with a new op-ed at National Review, but some significant damage was already done.
Start a conversation using these share links: