Today at the gym, I was watching a video of Paul Krugman discuss his latest book on combating zombie lies, one of which is that tax cuts pay for themselves. This, combined with another post I saw where a Republican claimed that tax revenue was increasing, got me thinking about the 2017 tax cuts which have not only not paid for themselves but didn’t stimulate any business investment.
Let’s start with this chart of total tax corporate tax receipts:
You’ll notice a very sharp drop that corresponds with the timing of the drop in corporate tax rates. Here’s a look at the same data which shows the Y/Y percentage increase:
In fact, right now corporate tax receipts are contracting on a Y/Y basis.
The tax cuts were supposed to lead to an increase in business investment, which also hasn’t happened. Like above, let’s look at the relevant data:
Above are the Y/Y percentage changes in the three types of business investment. Intellectual property (in red) rose a bit in early 2018 but has since returned to a more normal rate of growth. Equipment investment (in blue) has steadily decreased since 2018 and is now contracting. Non-residential investment has the same pattern.
So, to state the obvious from above:
1.) Corporate tax revenues are decreasing, and
2.) Business investment has not responded positively to lower taxes.