As the CEO who controls his own income, I continue to take my $1 million, but my take-home goes from $500,000 up to $750,000. I get richer -- and rapidly -- and I can stash that money in a Swiss bank account.
But I still know that you can only really live on $50,000 a year, and thus are only willing to do your job for that as take-home pay.
However, with a $100,000 before-tax salary, you'll now be taking home $75,000 -- way more than I know you need.
So, what does an employer do? He cuts your pay down enough that you're only still taking home $50,000 a year. Your $100,000 salary will -- over time, and through the process of layoffs and attrition, letting go of higher-paid people and hiring lower-paid people -- drift down to around $75,000, so you're still taking home $50K.
A 25% cut in taxes on working people will give a short-term boost to paychecks, but over a period of a few years it'll mean working people's before-tax wages will drop by about 25%. Employers, after all, know the minimum amount of take-home pay working people are willing to work for (aka "the labor market").
This is why when Republicans cut taxes, wages go down or stay flat for working people, a phenomenon we've watched over and over again since Reagan began this process in the 1980s.
Today, when the "older" (as in, "earning the old pay scale from when taxes were higher") workers move on or retire, they're replaced with new lower-paid workers. Factory jobs that used to pay $30/hour or more, for example, now pay $14/hour (check out the GM contracts negotiated over the past few decades as a vivid example).
According to economist Thomas Piketty, the poorest 50 percent of Americans have seen their incomes decline by a full 1 percent since 1978 -- even as incomes for the top 10 percent of Americans have jumped by a whopping 115 percent and incomes for the top .001 percent have skyrocketed an astronomic 685 percent.
The aforementioned progressive nature of our tax code -- big changes at the top are matched by much smaller changes at the bottom -- accounts for why wages have "merely" been flat or declined "only" 1% since Reagan, whereas wealth at the top has exploded under "conservative" tax policies.
Meanwhile, the larger effect of tax cuts defunding government will see the power of corporations and billionaires grow, while the ability of government to do things will shrink.
We've gone from NASA sending men to the moon to having to rely on private corporations to send rockets up to refill the space station. Starting with Reagan's government-defunding billionaire-friendly tax-cuts in the 1980s we stopped building and even repairing much of our infrastructure, causing the deterioration of our nation to nearly developing-world status in many parts of the country.
So, with the GOP in power, get ready to see working people's pay start dropping again, as it did starting in the 1980s after Reagan's tax cut and in the early 2000s after Bush's. Also get ready to see income inequality grow even worse, as the truly rich see a big boost in their take-home pay and thus their overall wealth, while working people and our nation's infrastructure get screwed.
And get ready for voters who have no idea how this all works to get totally behind the GOP "we'll cut your taxes" rhetoric, not realizing that Paul Ryan, Mitch McConnell and Donald Trump/Mike Pence view us all as merely useful idiots.
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