Rewrite the Rules New Report: Fool Me Once: Why Another Corporate Tax Cut Won’t Boost the Economy

In the 1980s, driven by supply-side economic theories, American policymakers began to deregulate and cut taxes on top earners and capital gains. The claim was that these changes would increase growth, tax revenues would increase, and all would benefit. Instead, the hoped-for growth never materialized, tax revenues fell, and the economy became less stable.

Traditional economic analysis often treats markets as if they were structured by natural law and could be understood purely by studying the shapes of demand and supply curves. But markets do not exist in a vacuum. As this illustration suggests, outcomes depend largely on the rules that govern the economy.

According to advocates of trickle-down economics, cutting top tax rates should encourage more work and more productive investment from top earners. But a Congressional Research Service report found “no conclusive evidence to substantiate a clear relationship between the 65-year reduction in the top statutory tax rates and economic growth.” Cutting taxes does, however, appear to increase pre-tax income for top earners.

The Roosevelt Institute and Democracy Corps conducted focus groups in Macomb County, Michigan to better understand voters who previously supported President Obama and cast their ballot for President Trump last year. This continues Roosevelt’s ongoing effort to better understand Trump’s appeal to working class voters in order to set an agenda for the future of the progressive movement. The survey revealed voters who were eager to dramatically change the economic and political status quo, deeply skeptical of congressional Republicans and their trickle-down policy proposals, anxious about some immigrant groups and expecting the new President to rein in health care costs for working people.

Read the polling memo here. 

While the average stock was held for around seven years in 1940 and two years in 1987, by 2007 the average share was traded every seven months. With the average shareholder interested only in short-term performance, shareholder value maximization translates into short-termism: focusing on quarterly returns, and even on accounting tricks to massage quarterly earnings.

This trend toward short-termism is seen in rising executive pay, increasing payouts to stockholders, frequent corporate restructurings, massive mergers, and reduced capital investment. These trends increase economic inequity and threaten long-term economic performance.

Racial wealth gaps have grown since the Great Recession, and the African-American unemployment rate is consistently around double the overall rate. Structural racism remains a pervasive issue in the U.S. economy, and equality of opportunity cannot coexist with such stark inequalities of wealth. We need to rewrite the rules that exclude people of color from the economy, which range from mass incarceration to the lax enforcement of anti-discrimination laws.

After decades of hostile policies and legal decisions and growing corporate influence, America’s unions are struggling to survive. This has led to the erosion of key protections like overtime pay and the minimum wage, to say nothing of stagnating compensation and the absence of key benefits like paid sick and family leave. With the gig economy creating more and more unstable and unprotected jobs, worker organization is more important than ever.

Since its release in May 2015, Rewriting the Rules has garnered hundreds of press hits, including write-ups in The Washington Post, TIME magazine, Vox, and The New York Times. Senator Elizabeth Warren described the report as “groundbreaking.”