2016 August 10^th

In “The Wall Street Journal” for Thursday August 4^th there appeared an opinion piece by Phil Gramm and Mike Solon, partners in a boutique lobbying firm. The firm pushes low tax legislation and in their opinion piece of last Thursday they offered their rationale about why the current recovery is “so slow.”

It will surprise no one to read that these lobbyists (not so identified by the WSJ) are of the opinion that high tax rates under President Obama are responsible. They point out that this recovery is slower than most and they compared the economy’s bounce under President Obama with the bounce that followed previous recessions. (Excepting the recovery after the great depression, which was hampered by Roosevelt’s various make work policies instituted to avoid starving the public.)

So let’s examine this so called slow recovery. There are certainly soft spots and the wages of the middle class have not improved very much. Many of the well-paying job losses are the result of automation, not the result of moving plants abroad. (Trump cannot understand this and neither can his followers.) As I wrote yesterday, we are producing twice as many cars and trucks as were produced when President Obama took office. Unemployment is under 5 percent and the stock market is at an all-time high. None of these data are at all convincing to the Gramm Solo lobbyists. Lobbyists have to convince you that things are terrible and if you hire them they’ll pressure the right legislators to remedy the situation for you.

Let’s look at the terrible tax situation that exists now under President Obama: Consider the corporate tax structure: Gramm Solon claims the federal corporate tax rate is the highest in the world at 35 percent. There are a couple of countries with higher corporate tax rates, but, generally speaking, ours are very high…except very few corporations pay that rate. If you average over the last five years and look at the rates for the top industrialized countries the average “effective corporate tax rate” is 16.1 percent. The US effective tax rate over that period is 13.4 percent. Lobbyists like Gramm and Solon have inserted enough loopholes in the corporate tax structure so that hardly any corporations pay the top rate…and some pay nothing at all. (You won’t learn that by reading WSJ.)

Now about the federal income tax that naughty President Obama has set at a marginal rate of 39.6 percent, but only on incomes topping 400 thousand a year. Gramm Solon considers this “over taxation” a cause of our anemic economic recovery. On the other hand, In 1969 Nixon set the marginal rate at 77 percent; it was at 50 percent in 1986 under Reagan; it was 91 percent under Eisenhower. Isn’t it amazing that the country did not sink irretrievably into depression given those marginal tax rates? Maybe the WSJ could ask these lobbyists why it’s only Democratic presidents whose much lower marginal income tax rates are so dangerous for the economy.