Are tax cuts a US supply-side scam?

Tax cuts masquerading as tax reform are the best way to describe the thrust of Washington's latest policy gambit. The case is largely political - namely, the urgency of a Republican Congress to deliver a legislative victory for a Republican president. The consequences, however, are ultimately economic - and, unsurprisingly, likely to be far worse than the politicians are willing to admit.

Taking the lead from US President Donald Trump, the political case for tax cuts is that they are essential to "make America great again". Over-taxed and cheated by bad trade deals, goes the argument, the United States needs tax relief to revive its competitive prowess.

Notwithstanding the political pandering to hard-pressed middle-class families, corporate America is clearly the focus of these efforts, with proposed legislation aiming to reduce business tax rates from 35 percent to 20 percent. Never mind that US companies currently pay a surprisingly low effective corporate tax rate, just 22 percent, when judged against post-World War II experience.