The editorial of Dec. 27, "Waiting for the Trickle," predictably criticizing the Republican Tax Cuts and Jobs Act, contains some mistaken information, starting with the statement that "a dozen GOP senators ... voted against the bill." If only three GOP senators had voted against the bill, it would have failed. In fact, no GOP senator voted against the bill.
The editorial also states: "The trickle-down economic theory ... has been tried several times over the past half-century, but has never worked." That is wrong. "Trickle-down" is a derogatory term for a common-sense and successful growth strategy of cutting federal income taxes substantially to give Americans the freedom of spending more of their own money the way they want in the private economy.
The economy grows, creating more jobs, higher wages, and broader prosperity. The first president to propose this strategy in recent years was a Democrat, John F. Kennedy. After his assassination, it was put into effect under President Lyndon Johnson in 1964. It brought strong economic growth.
President Ronald Reagan undertook another growth-oriented tax cut in 1981 in the midst of a severe recession. It was phased in over several years, and Reagan followed up with his tax reform package of 1986, which further cut tax rates. Reagan's tax cuts helped bring economic recovery and robust growth.
If polls are correct that many Americans are skeptical of the current tax cuts, the reason is likely misinformation spread by the Democrat Party and its friendly propagandists in the mainstream media. A Monmouth poll found that about half of Americans think the tax act will raise their taxes. Actually, according to the liberal Tax Policy Center, 80 percent of households will get a tax cut in 2018. Only about 5 percent of taxpayers will pay more.
A key provision lowers corporate income taxes from the highest rate in the industrialized world of 35 percent to 21 percent. This will encourage corporations to hire more workers, build more plants, upgrade equipment (enhancing productivity), and, with unemployment now at a 17-year low, raise wages. The more competitive tax rate may also encourage foreign businesses to open plants in the United States.
The editorial doubts that lower taxes and higher profits will encourage corporate investment, because corporations "have been sitting on trillions in ready cash reserves for several years" that they haven't invested. The reason for that is U.S. taxes. U.S. corporations have $2.5 trillion in foreign earnings they have been holding abroad. The companies already have paid foreign taxes on them and if they had brought the hoard home before now they would have had to pay the 35 percent U.S. corporate tax as well.
The new tax act allows corporations to bring that foreign stash home by paying a tax of 15.5 percent on cash, or 8 percent on reinvested foreign earnings. Companies have up to eight years to pay the tax. Under the act, future earnings abroad by U.S. companies may be brought home without paying a U.S. tax.
Will corporations and other businesses spend tax savings on growth-producing investments and higher wages? Some early indications: After passage of the tax bill, AT&T and Comcast announced bonuses of $1,000 for a total of more than 300,000 employees and billions in additional investments over the next five years. Wells Fargo and Fifth Third Bancorp raised their minimum wage to $15 an hour. Boeing moved up spending $100 million on worker development and another $100 million on facilities. Nexus Services raised pay 5 percent and said it would hire 200 more workers.
Few things about the future are certain, but after years of stagnant wages and growth, the Tax Cuts and Jobs Act holds the promise of increased opportunity and prosperity due to American individuals and businesses being freed to spend more of their own money and foster a growing, competitive, dynamic free-market economy.