It’s interesting that Stephen Demetriou’s recent BDN OpEd critical of Sen. Susan Collins’ vote in favor of the Tax Cuts and Jobs Act came just two days after the International Monetary Fund released a report predicting that U.S. economic growth would surge thanks to that same tax cut.
Almost all Americans believe that economic growth comes from the private sector, and so it only makes sense that having a business-friendly tax code will boost jobs and wages. As President John F. Kennedy, a Democrat, said back in 1963, “A rising tide lifts all boats.”
Yet until last month, the U.S. economy had been dammed up against any such rising tide; America had the dubious distinction of having the highest corporate tax rate in the developed world. As Apple CEO Tim Cook said recently of that uncompetitive corporate rate, “We thought this was never good for the United States because it motivates people to invest elsewhere instead of in the country.”
Happily, thanks to Collins and her fellow economic tide-risers, that rate has now been reduced to 21 percent, and the results are there to see: Investment capital is rushing back. Indeed, Apple has just announced it will be pumping $350 billion from overseas back into the U.S. economy — including $38 billion directly into the U.S. Treasury — and hiring 20,000 more workers.
Here in Maine, that rising tide is plain to see. Earlier this month, Camden National Bank announced that, thanks to the tax cut, it would be supplementing the pay of all non-executive full-time employees with bonuses of $1,000 and part-time employees with an extra $750. Moreover, Camden is figuring out how to give permanent raises to its employees.
Meanwhile, Walmart, one of Maine’s largest employers, has also added bonuses for its employees, as well as expanded maternity and parental-leave benefits.
Still, some critics of the bill have said that these benefits are just “crumbs.” But as Collins wrote in December in the Portland Press Herald, “A single mother of one child who earns $35,000 will see her taxes drop by nearly 4,000 percent. Instead of paying income taxes to Washington, she will be getting back nearly $1,100 to help her make ends meet.” For a working person, that’s a lot more than a crumb.
OK, so it’s pretty obvious that the tax bill is going to increase growth and wages. But what about the issue of economic inequality? For sure, that’s an important issue, too.
Michel Kelly-Gagnon, president of MEI, a Quebec-based think tank, argues that the best way to raise workers’ wages is through improvements in the business climate. After all, it’s the health of the economy that causes employers to want more employees, and to be willing to bid up wages to get them. As Kelly-Gagnon put it recently, “The corporate tax rate affects the business environment: the general level of economic growth, investment, and entrepreneurial activity.”
Indeed, he points to a study from the American Enterprise Institute showing a remarkably close correlation between reductions in the corporate tax rate and increases in workers’ wages. Once again, this is not rocket science: If corporations do much of the nation’s hiring, it’s good logic to make it easy for them to hire more.
Yes, John F. Kennedy was absolutely right: A rising tide lifts all boats. And so we might note that more than half a century ago — Jan. 24, 1963, to be precise — that JFK formally proposed big pro-growth tax-rate reductions to Congress. As he liked to say, “Let’s get the country moving again.” Those tax cuts were enacted — although only after his tragic death — and the economy did, in fact, get moving.
Interestingly, one of the “aye” votes on that bill back then was Maine’s legendary Sen. Margaret Chase Smith, whose seat Collins now holds.
So we can see, then and now, what matters most for Maine is doing the right thing for all Mainers. And that’s exactly what Collins has done once again.
James P. Pinkerton served as a domestic policy aide in the White Houses of Presidents Ronald Reagan and George H.W. Bush. Since 2011, he has been the co-chair of the RATE Coalition, a group of companies and associations that advocates for a more competitive tax code.
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