10% Tax Cuts Coming Soon?
Donald Trump is once again talking about cutting income taxes for middle-class citizens by 10%. Considering that none of the congressional leaders or White House officials know anything about his tax cut plans, I'm assuming it's some "campaigning gimmick" which is being deployed to garner more votes for the midterm elections. Nonetheless, it would be interesting to see if such a decision ends up materializing.
Any other politician and I'd immediately write this off as empty pre-election grandstanding. But with Trump... say what you will about him, but when he talks about policy, thus far he's demonstrated he's likelier than most to follow through. So we'll see.
That said, with the Dems very likely to pick up the house in November, he'd need to act pretty fast. Life's about to get a whole lot more challenging for his legislative agenda.
could be a ploy to smear the democrats. who wants to be remembered as the guy who voted against a middle class tax cut?
Yeah that's pretty much it. Deficit blows out, blame democrat spending.
yes!
Tax cuts are used as political bullshit. The deficit is already on shaky ground after the corporate cut. Why now is a good time to cut taxes more is beyond me. Not to mention, it will hurt the government more than a 1% increase on 50K a year will help any individual.
Tax revenues are at an all-time high. Tax cuts, historically, always drive revenue growth at the federal level. It was true for JFK, Regan, Clinton, Bush and so forth. Deficits are a function of spending. Not tax cuts. Actually, tax increases grow deficits. We've seen this during the Euro crisis.
That said, in response to the OP. The "middle class," whatever that is, doesn't need tax cuts. High income earners need tax cuts. The top 10% earners account for 80% of all federal income taxes.
Double
Clearly, this is a massively unpopular thing to say among the general public who touts ‘fair share’ all the time....it’s still true though.
This is just absolutely false.
If you think about any operating model, lower revenue (a tax cut) typically means lower profit on a per $ basis.
Aside from this tax cut or any particular tax cut, tax cuts generally have been shown by economists to only have a direct and immediate impact on revenue collection.
With regard to the tax cuts recently passed:
Not trying to make this partisan, but a lot of research shows that because economic factors tend to lag, democrats stimulate the economy but by the time the populace catches on a repub has already taken over and so he gets to take credit. Just some research I've seen.
And I'm surprised people aren't catching on to your textbook bullshit Milton Friedman isms.
Is that you, Grover Norquist? I cannot believe in the Year of our Lord 2018, that there are educated people who still believe in supply-side economics.
This doesn't prove your point, it only shows how concentrated wealth and earnings are in this country.
The US has an absolutely massive spending problem. It spends as if it were a rich country. Let me break the bubble -- it's not, at least not on any level that justifies its current spend.
A middle class tax cut is unlikely to happen. Between it and throwing 15000 troops at the border to stop a caravan of less than half that number more than 1000 miles away, Trump is clearly just spewing nonsense to get his base out to vote. There is an excellent chance the Democrats take the House. It seems the Republicans will probably keep the Senate. In this scenario, legislation will grind to a halt. There will be no 'middle class' tax cut.
Esuric is right on one count--I have no idea what 'middle class' means. A household in the 90th percentile of income earners in the US makes about $180K per year. The median household makes about 1/3 that much. If you go a decile below the median, the people in that category have an effective federal income tax rate of 0%. If you cut Federal income tax rates, the people paying no federal income taxes have no more money in their pockets. That's why broad-based tax cuts always disproportionately benefit the wealthy.
The basis for the debate on tax policy essentially centers on what people feel is 'fair'. In this context, 'fairness' is basically our collective sentiments on the distribution of income and the rates people pay across the spectrum of earners. Does it make sense that almost half the country pays no federal income tax? Does it make sense that the .01% pay a lower rate than the marginal guy at the 10th percentile? While I think everyone should pay some tax if they earn money in this country, it's a complete misnomer to say the bottom two quintiles pay no tax. They have payroll taxes, sales taxes, etc. They just don't pay any federal income tax. They might have an effective tax rate (through all the other taxes they pay) higher than the .01% folks. That's an odd system. I think it's flawed.
Our tax code is fundamentally designed to screw people that have high incomes but no ability to shield wealth. Not all forms of wealth creation or income aggregation are treated equally in our country. Ordinary income is the worst way to attempt to accumulate wealth, but it's the only option most people will ever know. If you sell your time to someone else who sells it on to the market, you make money the way a poor person makes money. You might be a doctor, lawyer, investment banker, or some other high-level services professional, but you're still earning money through ordinary income. We tax ordinary income too highly in my opinion. Our tax rates on corporations and investment income are too low in my opinion.
A tax cut on ordinary income for ordinary, middle-class Americans would be welcomed by me. BUT, I want it paid for through reduced spending or increases in other tax rates. We are approaching $1 trillion dollar deficits every year for the foreseeable future, all of which we finance through issuing debt. Where the fuck did Republican fiscal responsibility go? No serious economist thought the tax cuts would expand the tax base through growth to the point that the tax cuts would be revenue neutral. No serious econometrician thought that, but that was the line that was sold to the American public to pass the tax cuts. We got more growth than most economists hoped for, but still far less than was needed for the tax cuts to be revenue neutral. And we were in a boom. We didn't need fiscal stimulus. We needed fiscal responsibility. But we're spending like profligate gamblers. It makes no sense.
In any case, a middle class tax cut is unlikely to happen. It's not well defined. We can't really afford it without adding materially to our already massive deficits. And there is 0 chance that Trump will be raising his own taxes to pay for it. The more likely tax cut is the one floated a month or two ago associated with linking inflation to asset values. In that proposal, your capital gains taxes would be greatly reduced for long-held assets (like real estate) by adjusting your purchase price of the asset to its value in today's money rather than using its original purchase price. That's the sort of tax cut someone like Trump can get behind. It's too complicated to explain to most people, it doesn't impact the middle class at all, and it's a big win for people making the majority of their income from capital gains.
brotherbear, I really find most of your insights eye opening. Being as you have worked in europe (france I believe, and also maybe the UK) could you go a little deeper into how these nations tax systems function as opposed to our own. The UK has a far lower corporate tax than the US, yet it's income taxes on W2 or ordinary income are slightly higher. I assume this is offset with the NHS, but I'm not sure. Any insight is appreciated.
Really, really well put mate.
He’s been talking about this for a bit. Issue is Dems aren’t going to vote for anything they Trump puts forth.
Taxes Are government theft. The goal should be the lowest level feasible. Any tax increase should have an ironclad justification.
Taxes aren't government theft. My God--at least try to make more defensible statements. When you lead with something so slanted, who will take the rest of what you say seriously?
Taxes are table stakes for modern societies. It's the ante you pay when you play in a particular sandbox. By the way, you don't have to remain in that sandbox. You can leave and live in another society so long as you are wanted there. If you don't want to live in a society that has any social programs, I suppose that's your choice. But if you choose to remain in the US, you also choose to abide by its system of financing the societal activities that our system of government provides its citizens.
Perhaps if you convince enough other people that 'taxes are government theft' we can finally cut some spending. I'd love some fiscal responsibility, but both parties are ludicrous, hypocritical spendthrifts, so that's not going to happen. Working within the imperfect system we have, the minimum we can expect from our government is to not bankrupt the country by the time we retire. We can't add a trillion dollars per annum to the national debt from now until I retire without serious ramifications.
Even if I have meaningful personal wealth, I don't want to be old and infirm in a country that can't pay its bills or dedicates half its tax revenues to debt servicing. Even if I am protected, the country is worse for it. I want to live in a country with world-class infrastructure, excellent schools regardless of your social class at birth, a retirement system that doesn't leave people fearful of destitution after they're no longer able to work, and health care for everyone so I don't catch their diseases. I want to live in a country filled with people who aren't scared all the time of the future. That means a strong economy, a strong military, strong borders, an immigration system that takes in both refugees and Oxbridge engineers to fill the full range of jobs we're creating, and a health care system that doesn't unexpectedly bankrupt people who get sick in between jobs or fall in the 'coverage gap'. I want a working judicial system, a public penitentiary system as opposed to these ridiculous private prisons, modern fire departments, strong police departments, clean water, clean air, access to public transportation and some better airports since I have to spend so much time traveling.
Taxes pay for a lot of these things. Private markets wouldn't allocate resources the way I might want them to (or the way you might want them to). For instance, some of those tax dollars could have been used to provide you the basic education needed to know that taxes aren't government theft. I'm happy to pay those taxes, but perhaps they didn't reach your community.
Good lord.
The government takes from you by threat or bodily harm. That’s theft. This country was founded because of oppressive taxation.
And if you read the sentence right after, I clearly say that taxes should be as low as possible.
Those who earn should be able to keep what they earn.
getwoke
Brotherbear, Thank you, I consistently learn something or at the very least get the old knocker thinking everyime I read one of your posts.
Do you even know what the word theft means? Becuase it is pretty clear you don't.
Congress; just say no! Cutting taxes when the economy is performing well is a dumb idea. Now we want to double down on dumb. Cutting taxes could easily lead to higher inflation, higher interest rates and then lower securities prices.
There is absolutely no relationship between taxes and inflation. Taxes and inflation were super high in the 70s and they were both super low throughout basically the entire 19th century. I feel bad that you kids are so poorly educated and believe things that are so easily refuted.
Deleniti adipisci dolor laborum deleniti accusantium. Qui autem inventore corrupti ut soluta dolorem. Saepe dolores quos molestiae.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...
Excepturi esse aliquid dicta animi. Doloribus quaerat id dolores excepturi et expedita harum. Dolores architecto ipsam est qui eos sequi sit. Nesciunt dolorem labore molestiae voluptates dolor enim eligendi ex. Eligendi commodi accusamus et ut ut quos.
Omnis eos voluptas id qui qui accusamus. Expedita reiciendis deserunt labore fugiat minima hic iure. Ducimus in mollitia excepturi facilis. Est hic a ipsum quis ut. Facere officiis non quia sit. Fugiat unde sapiente hic soluta rem perferendis. Est accusantium asperiores voluptate libero provident repudiandae.
Fugiat nesciunt minima quos aut cumque quas. Non molestias vel et praesentium quis. Quia dolor officia eum sed voluptatem tempora. Et sed voluptates reiciendis modi autem.
Molestiae animi nesciunt qui corrupti sunt error est. Velit neque repudiandae nulla nemo vitae sunt autem. Et et alias consequatur nulla ut hic voluptates.