Democrats' straw man fights tax cuts

If you listen to partisan Democrats or to the New York Times editorial board, you get the impression that the tax bill before Congress is a gift to millionaires and billionaires, and Armageddon for the rest of us.

The Times’ editors were so alarmed about Congress lowering America’s corporate tax rate, which is nearly the highest in the developed world, that it urged readers via Twitter to contact their senators. The publication even provided the congressional office phone numbers. That's admirable political activism, one supposes, but it's hardly compelling journalism.

Democrats, along much the same lines, argue that corporate tax cuts simply don’t necessarily create jobs. This is because businesses are not obliged to use tax savings to hire anyone. A video posted on Bernie Sanders’ Senate websiteoffers a typical version of this argument. It refers to a study of corporations that keep their tax liability below 20 percent of profits through the various tax avoidance measures available in the tax code. Not only are these companies not juggernauts of job creation, but they significantly lag the economy as a whole in hiring. Instead of hiring, they tend to take their tax savings and use it to offer larger pay packages to their CEOs.

But the lesson here is not that corporate tax cuts don't and won't create jobs. Companies that spend an inordinate time scheming to avoid tax, and less time growing an efficient business, do so because the tax code encourages them to behave that way. They are slower to invest in making money the productive way because real business activity is riskier than the squeezing of every last penny out of a corporate tax return.

This is how a dysfunctional tax system such as the one we now have strangles a national economy, and it is why lower tax rates are needed without delay.