Taxes: One of the talking points Democrats and the left often drag out to justify reversing the Trump tax cuts is that the U.S. is “undertaxed” compared with other nations. A new study shows that’s false.
Everyone from House Minority Leader Nancy Pelosi to Senate Democratic Leader Chuck Schumer to socialist independent Bernie Sanders says they would reverse the tax cuts. It’s premised not on the idea that we spend too much, but that working Americans keep just too dang much of their own money.
The problem is, as a new OECD study shows, that’s not true.
The OECD, the think tank for the world’s wealthiest nations, looked at 12 major countries in Europe, the Americas and Asia. The U.S. finished third in terms of taxes at 18.4% of income. Continue reading
Taxes: There’s a growing disconnect between the economic benefits spinning off the Republican tax cuts and the poll numbers. Is the public going sour of them? Or is this just more wishful thinking on the part of Democrats and the liberal press?
Just the past week saw three more examples of the tax cuts’ benefits.
Item 1: Kroger announced that it was accelerating wage hikes, increasing the company’s 401(k) match, enhancing benefits, and expanding employee discounts. All, it said, thanks to the Republican tax reforms. Kroger joins more than 500 other companies who’ve extended bonuses, wage hikes, or improved benefits to more than 4 million workers in the wake of the law’s sharp reduction in corporate tax rates.
Item 2: A Gallup poll found that the public thinks the tax code is more fair today than it was before the Republican tax cuts took effect. Just 42% now say middle income families pay too much in income taxes, down from 51% last year. And 26% Continue reading
The latest monthly Treasury report on taxes and spending shows that gross tax receipts in February were $1.4 billion higher than the year before. Weren’t the Republican tax cuts supposed to explode the deficit?
According to the report, the government took in $238.2 billion in taxes in February. The year before, tax revenues were $236.8 billion.
For fiscal year 2018, which started last October, taxes are up $50.5 billion compared with the same months last year, and are at a record high level for this five-month span.
The report does show that net receipts were lower in February compared with last year, but the main reason is that individual income tax refunds jumped $13.3 billion, while corporate tax refunds went up $4 billion, neither of which is the result of the tax cuts that took effect in January.
Even so, net receipts are up by $29.6 billion for the current fiscal year — a 2.4% increase — compared with the same period last year. That’s also a record high. (See nearby chart.)
Does this mean tax cuts are “paying for themselves”?
Not exactly. Income taxes collected in February were down $2.5 billion from last year — reflecting the new withholding tables. Corporate income tax collections, however, were essentially flat.
But remember, income taxes are hardly the only source of revenue for the federal government. And a faster-growing economy means more money pouring in from these other sources.
Payroll taxes, for example, are dependent on the number of people working and their wages. In February, the economy added 313,000 jobs, unemployment levels are now at or near record lows, and wages are climbing.
As a result, payroll taxes brought in $1.5 billion more in February than they did last year, and are up $11.4 billion this fiscal year. Federal excise taxes and customs duties are up $3.8 billion and $1 billion, respectively, this fiscal year.
What these numbers do show is that all the hand-wringing about the impact of the tax cuts on federal deficits was based on wildly exaggerated estimates of revenue losses, which failed to take into account the fact that a faster growing economy would offset at least of the lost revenue. That’s a point we’ve made repeatedly in this space.
In contrast, tax hikes almost always bring in less revenue than expected, because they dampen economic growth.
Democrats once understood this truism. It was JFK, after all, who said in 1962 “it is a paradoxical truth that tax rates are too high today and tax revenues are too low — and the soundest way to raise revenues in the long run is to cut rates now.”
Today’s Democrats, in contrast, uniformly opposed the Trump tax plan, and are now pushing to repeal most of it so they can spend an additional $1 trillion on government make-work infrastructure projects.
Their plan has no chance of being enacted, but at least voters will have a clear choice this November.
by Alfredo Ortiz • Real Clear Politics
Pending tax cut legislation will eliminate the federal income tax burden on the average American family earning $59,000 a year. It will halve the tax bill for the average family earning $75,000. And it will allow the overwhelming majority of small businesses to protect nearly one-quarter of their income from taxes.
That’s the bottom line of the tax bill that needs to be said up front.
Given the critical media coverage of the bill, these benefits have largely gone overlooked. Rather than reporting on its provisions to double the standard deduction, double the child tax credit, and eliminate the 15 percent tax bracket in favor of a vastly expanded 12 percent rate, media coverage has claimed the bill is a gift to the rich. Rather than reporting on the new 23 percent tax deduction for small businesses earning less than $500,000 a year, media
coverage has claimed the bill is a budget buster.
That’s a shame because these benefits would bring long overdue relief to hardworking taxpayers who have borne the brunt of the slow growth Obama economy from which the country is finally emerging. Continue reading
By Glenn Kessler • The Washington Post
“On average, middle class families earning less than $86,000 would see a tax increase under the Republican ‘tax reform’ plan.”
— Sen. Kamala Harris (D-Calif.), in a tweet, Oct. 27
“The average tax increase on families nationwide earning up to $86,100 would be $794.00”
— Sen. Robert P. Casey Jr. (D-Pa.), in a tweet, Oct. 24
“Under GOP plan, U.S. families making ~$86k see avg tax increase of $794.”
— Sen. Jeff Merkley (D-Ore.), in a tweet, Oct. 24 Continue reading
By Newt Gingrich • Fox News
The left-wing media and the elites never seem to tire of being wrong.
Remember in May when President Trump said his policies would spur the U.S. gross domestic product (GDP) to grow at a rate of 3 percent or higher? The so-called experts insisted that it was unrealistic, highly unlikely, and probably impossible.
Some of these experts suggested 3 percent growth could only happen if our immigrant population doubled over a decade or the nation went to a six-day work week. They said even if unemployment fell to zero, we still wouldn’t get close.
Imagine their surprise then when the Commerce Department announced on Friday that the GDP has grown at 3 percent – for the second quarter in a row. Continue reading
By Julie Kelly • National Review
Scott Pruitt, Trump’s EPA administrator, is the top target of the anti-Trump lynch mob. He’s enduring daily attack pieces in the media and threats of violence against him and his family. It’s hard to think of any cabinet member — current or former — who has been subjected to more vitriol and vilification than Pruitt, and he’s been on the job for less than a year. Suddenly, everything from overlooked Superfund sites to the Flint water crisis to “toxic” pesticides are Pruitt’s fault, which of course means he is poisoning children and destroying the planet.
According to the EPA inspector general’s office, Pruitt has received “four to five times the number of threats” that his predecessor, Gina McCarthy, did. The level of concern for Pruitt’s safety is so deep that agents are being added to his round-the-clock security detail. In a recent Bloomberg News interview, Pruitt said, “The quantity and the volume — as well as the type — of threats are different. What’s really disappointing to me as it’s not just me — it’s family.” Continue reading
By Ali Meyer • Washington Free Beacon
President Donald Trump’s tax reform framework could raise GDP by as much as 5 percent and wages by as much as 7 percent, according to a new study from Boston University economists.
“We find that, depending on the year considered, the new Republican tax plan raises GDP by between 3 and 5 percent and real wages by between 4 and 7 percent,” the economists explain. “This translates into roughly $3,500 annually more annual real take-home pay for the average American household.”
Economists believe this growth can happen due to the plan’s aim to reduce the marginal effective corporate tax rate from 34.6 percent to 18.6 percent, which they believe will grow the capital stock by 12 to 20 percent. Continue reading
By Peter Roff • USNews
Serious people are starting to wonder if tax reform can pass, largely because they’re only talking to people inside Washington.
Instead they should talk to the American people. Most of them are hungry for it. A quarter of small business owners surveyed by CNBC/Survey Money said taxes were the most critical issue they currently face. Overall it’s their No. 1 concern and, since small business is the engine of growth in the U.S. economy, that’s an important consideration.
Things have improved since Election Day 2016, but the economy is still not growing like it needs to if we are to have hope of ever paying down the national debt, now equal to about one year’s U.S. GDP. Continue reading
by Lawrence Kudlow, Stephen Moore, Arthur B Laffer, and Steve Forbes • Investor’s Business Daily
President Trump and Republican leaders in Congress must act with much more urgency and decisiveness on tax cuts.
In recent weeks the tax cut agenda seems stalled out and the delays and indecision are negatively affecting growth and the stock market. We hear that a tax plan from the White House may not come until the fall and may not even pass Congress until 2018 – if at all.
Is it any wonder that investors are getting jittery? The stock market had priced in much of the anticipated benefits to business, wages and profits, which accounts in no small part for the $3 trillion rise in equity values and the surge in business and consumer confidence after the election. Now the confidence is waning. Continue reading
By Edward P. Lazear • Wall Street Journal
President Trump’s tax plan leaves many details undefined, but there is plenty to evaluate. The administration claims its proposed changes would encourage growth and make the tax system more efficient. History suggests they will.
Less certain is the claim that the tax cuts will pay for themselves. Although budget concerns should always be paramount when cutting taxes, revenue neutrality does little to guarantee that this—or any—administration will exercise fiscal responsibility.
Most economists favor moving away from taxing capital and toward taxing consumption through value-added or sales taxes. Taxing capital squelches growth because capital is mobile and can cross borders in search of the highest risk-adjusted, after-tax return. Economists in both parties have scored the effects of eliminating capital taxation in favor of a pure consumption tax. Estimates range from a 5% to 9% total increase in gross domestic product. Continue reading
by Stephen Moore • The Washington Post
It was 40 years ago this month that two of President Gerald Ford’s top White House advisers, Dick Cheney and Don Rumsfeld, gathered for a steak dinner at the Two Continents restaurant in Washington with Wall Street Journal editorial writer Jude Wanniski and Arthur Laffer, former chief economist at the Office of Management and Budget. The United States was in the grip of a gut-wrenching recession, and Laffer lectured to his dinner companions that the federal government’s 70 percent marginal tax rates were an economic toll booth slowing growth to a crawl.
To punctuate his point, he grabbed a pen and a cloth cocktail napkin and drew a chart showing that when tax rates get too high, they penalize work and investment and can actually lead to revenue losses for the government. Four years later, that napkin became immortalized as “the Laffer Curve” in an article Wanniski wrote for the Public Interest magazine. (Wanniski would later grouse only half-jokingly that he should have called it the Wanniski Curve.) Continue reading
How often have you heard a Democrat prattle on and on about how well Barack Obama has done with the economy, given the mess he inherited? Usually, it’s some version of, “Things are getting better, but the economy the President started with was so awful, so he’s done as well as anyone could expect.”
When Ronald Reagan took over from Jimmy Carter in ’81, things were actually worse economically compared to when Obama took over from George W. Bush in ’08. Continue reading
While the 2000s may have been a lost decade for the American dream, a revival of our model’s advantages is still a real, worth-desiring possibility.
Because it was tax day recently, because he mentions me and because I’m easily provoked, below the quote you’ll find three rejoinders to Jonathan Cohn’s admirably forthright argument that American society would be much better off if most of us were writing larger considerably larger checks to Uncle Sam:
Maybe you don’t like tax day … [because] it reminds you of how high taxes are—and you think that, because of those high taxes, the economy grows more slowly. That would mean fewer jobs and less pay for you—and the country as a whole. It’s not a crazy argument … But the evidence for this point of view turns out to be thinner than you’ve probably heard. Relative to other countries, tax rates in the U.S. are relatively low, even when you throw in local and state taxes and add them to federal levies. Overall, according to the Tax Policy Center and Center on Budget and Policy Priorities … taxes in the U.S. are among the lowest in the developed world. The average for countries in the Organization for Economic Cooperation and Development, an organization of rich countries, is higher. And in countries like Sweden, Norway, and the Netherlands countries, the average is much higher. In those nations, taxes account for more than half of total national income. Continue reading
Our corporate tax rates are far too high. The rate kills investment and job creation and it makes us less competitive with other nations who have had the good sense to lower their tax rates. Germany has cut its rates almost in half in the last 25 years. Socialist Sweden has cut its by more than one half. And Ireland has cut its rates by almost 75%. We, on the other hand, have raised our corporate tax rates over that time period — leaving us with the highest rates in the industrialized world.
It is no coincidence that our unemployment rate is historically high and our labor participation rate is historically low. It is also no coincidence that our economic growth rate is painfully slow and far too low.
We realize that there will not be any meaningful tax reform or lowering of the tax rates this year. But the idea that the Senate Finance Committee might consider extending some legitimate tax deductions for manufacturing that actually make profits and employ people, but killing others means that the Senate plans to raise taxes on some american corporations at a time when the economy is weak, employment numbers are bad and taxes are already too high. This is bad policy! Continue reading