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Opinion | Geoff Diehl

The Democrats are wrong about tax cuts and deregulation


In December 2017, Senator Elizabeth Warren teamed up with Bernie Sanders to complain in The New York Times that the Tax Cuts and Jobs Act, then on its way to being passed by Congress, would be “an enormous tax giveaway to the wealthy.” In a subsequent interview on CNBC, Warren opined that the act gave “$1.5 trillion away to the richest Americans and the biggest corporations, and let everybody else pick up the crumbs.”

But if she delved into the economics of the legislation and addressed how it would benefit her constituents, she would find that the act has significantly helped the Massachusetts economy. According to the Institute on Taxation and Economic Policy, about 80 percent of the Commonwealth’s taxpayers will receive a tax cut, helping people all across the board and creating a surplus of $1.2 billion in revenue for the state.


The key provision of the Tax Cuts Act is the reduction in the corporate tax rate from 35 percent to 21 percent. Never mind that the idea of reducing the US corporate tax rate, previously the highest in the world, has long had bipartisan support. And never mind that support for cutting the rate is based on data from the Tax Foundation showing that a lower tax rate would spur GDP growth, investment, and job creation.

In the short time since the passage of the act, we already have evidence of its effectiveness in promoting economic growth. US real GDP growth in the second quarter of 2018 was 83 percent greater than it was in the second quarter of 2016, the last year of the previous administration. The growth of real private fixed investment was 129 percent greater. The unemployment rate fell from 5.0 percent in September 2016 to 3.7 percent in September 2018


The Tax Cuts Act is not the only action to come out of Washington that has spurred the economy. There have been 74 recent steps to eliminate burdensome regulations that have played their own role in hindering the economy. It is worth delving further into the effects of the Tax Cuts Act, though, in order to grasp the class-warfare mindset that characterizes our senior senator.

Mainstream economic theory argues that a reduction in the corporate tax rate will incentivize corporations to invest and create jobs. The only question is how much investment and how many jobs. Using its peer-reviewed US Economic Model, the Beacon Hill Institute, a Massachusetts think tank, has found that the Tax Cuts Act will, by the end of 2018, have caused real US GDP to rise by $547 billion and private investment by $179 billion. It will have added 2.9 million new jobs to the US workforce. Massachusetts alone will have added 29,000 new jobs, $3.2 billion in private investment, and $6.7 billion in disposable income by the end of the year. Both the Tax Foundation and the Joint Committee on Taxation of the US Congress have likewise found positive effects on the economy.

For many Democrats, however, none of this matters. Corporations are just pots of money to be redistributed from self-interested shareholders to their own preferred social classes. They can’t grasp the idea that when shareholders are allowed to keep more of their profits, they will want to invest in plant, equipment, and job creation.


To avoid going back to a stagnant economy of no wage increases, no job growth, and high unemployment and underemployment, policies need to be evaluated by how they will affect Massachusetts industry and jobs. By decreasing regulations and taxes, we will continue to encourage entrepreneurs and small businesses, which create three out of every four new jobs in the Commonwealth.

To roll back the 2017 tax cuts and to reintroduce the regulations that have recently been lifted by the federal government would threaten to return the nation — and the state — to the economic doldrums that beset the Obama administration.

But we want to go forward, not backward. Congress needs to make the individual tax cuts in the Tax Cuts Act permanent and act on their many more proposed deregulatory measures that need to be undertaken if we are to keep the economy humming. It is necessary to expand the policies that have led the nation and the state to its current wave of prosperity and build toward the future rather than obstruct.

State Representative Geoff Diehl is running against Elizabeth Warren for US Senate.