Quote:

Four decades ago, while working for Rep. Jack Kemp (R-N.Y.), I had a hand in creating the Republican tax myth. Of course, it didn’t seem like a myth at that time — taxes were rising rapidly because of inflation and bracket creep, the top tax rate was 70 percent and the economy seemed trapped in stagflation with no way out. Tax cuts, at that time, were an appropriate remedy for the economy’s ills. By the time Ronald Reagan was president, Republican tax gospel went something like this:

    The tax system has an enormously powerful effect on economic growth and employment.
    High taxes and tax rates were largely responsible for stagflation in the 1970s.
    Reagan’s 1981 tax cut, which was based a bill, co-sponsored by Kemp and Sen. William Roth (R-Del.), that I helped design, unleashed the American economy and led to an abundance of growth.

Based on this logic, tax cuts became the GOP’s go-to solution for nearly every economic problem. Extravagant claims are made for any proposed tax cut. Wednesday, President Trump argued that “our country and our economy cannot take off” without the kind of tax reform he proposes. Last week, Republican economist Arthur Laffer said, “If you cut that [corporate] tax rate to 15 percent, it will pay for itself many times over. … This will bring in probably $1.5 trillion net by itself.”

That’s wishful thinking. So is most Republican rhetoric around tax cutting. In reality, there’s no evidence that a tax cut now would spur growth.

The Reagan tax cut did have a positive effect on the economy, but the prosperity of the ’80s is overrated in the Republican mind. In fact, aggregate real gross domestic product growth was higher in the ’70s — 37.2 percent vs. 35.9 percent.

Moreover, GOP tax mythology usually leaves out other factors that also contributed to growth in the 1980s: First was the sharp reduction in interest rates by the Federal Reserve. The fed funds rate fell by more than half, from about 19 percent in July 1981 to about 9 percent in November 1982. Second, Reagan’s defense buildup and highway construction programs greatly increased the federal government’s purchases of goods and services. This is textbook Keynesian economics.

Today, Republicans extol the virtues of lowering marginal tax rates, citing as their model the Tax Reform Act of 1986, which lowered the top individual income tax rate to just 28 percent from 50 percent, and the corporate tax rate to 34 percent from 46 percent. What follows, they say, would be an economic boon. Indeed, textbook tax theory says that lowering marginal tax rates while holding revenue constant unambiguously raises growth.

But there is no evidence showing a boost in growth from the 1986 act. The economy remained on the same track, with huge stock market crashes — 1987’s “Black Monday,” 1989’s Friday the 13th “mini-crash” and a recession beginning in 1990. Real wages fell.

Strenuous efforts by economists to find any growth effect from the 1986 act have failed to find much. The most thorough analysis, by economists Alan Auerbach and Joel Slemrod, found only a shifting of income due to tax reform, no growth effects: “The aggregate values of labor supply and saving apparently responded very little,” they concluded.

The flip-side of tax cut mythology is the notion that tax increases are an economic disaster — the reason, in theory, every Republican in Congress voted against the tax increase proposed by Bill Clinton in 1993. Yet the 1990s was the most prosperous decade in recent memory. At 37.3 percent, aggregate real GDP growth in the 1990s exceeded that in the 1980s.

Despite huge tax cuts almost annually during the George W. Bush administration that cost the Treasury trillions in revenue, according to the Congressional Budget Office, growth collapsed in the first decade of the 2000s. Real GDP rose just 19.5 percent, well below its ’90s rate.

We saw another test of the Republican tax myth in 2013, after President Barack Obama allowed some of the Bush tax cuts to expire, raising the top income tax rate to its current 39.6 percent from 35 percent. The economy grew nicely afterward and the stock market has boomed — up around 10,000 points over the past five years.

Bruce Bartlett was a domestic policy adviser to President Ronald Reagan. He is the author of “The Benefit and the Burden: Tax Reform — Why We Need It and What It Will Take."

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Patlal said:

I just watched the speech.

Low income earners will see benefit. Mom and pop business will see big benefits. The simplification part should benefit everyone.

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Quote:

Statement 1: "Our framework includes our explicit commitment that tax reform will protect low-income and middle-income households, not the wealthy and well-connected. They can call me all they want. It's not going to help."

Mr. Trump made a few claims in that statement, so let's unpack it.

The plan is unlikely to do much to help low-income individuals and families. The framework does increase the standard deduction from more than $6,000 to $12,000, meaning that basically, anything a single person makes up to $12,000 is all his or hers. The standard deduction for married couples filing jointly will increase from more than $12,000 to $24,000, meaning anything a married couple earns up to that amount is basically tax free. But the president's proposal also raises the lowest tax rate, currently at 10 percent, to 12 percent. It's unclear who will be paying that rate, since the White House didn't give any income levels. But it's fair to say that those people won't be making very much. Mr. Trump does want to increase the child tax credit, up from its current level of $1,000. The president's plan does not mention the Earned Income Tax Credit, or EITC, which applies to lower-income filers with children.

For middle-class families and individuals, even White House officials earlier this week in a conference call with reporters were unable to promise it will not add to their tax burden, and they certainly weren't able to promise it will significantly reduce their taxes. The plan could very well mean some middle-class families pay slightly less, while some pay slightly more. The impact of the tax changes also depends not just on income, but on geography. The president's plan eliminates a deduction for state and local income taxes, meaning those in higher-tax states like California and New York will pay significantly more in taxes to the federal government.

The administration's tax plan is most likely to benefit the wealthy, of any income group, from what we know.

For one thing, the plan eliminates the estate tax, a tax that penalizes only the wealthy, and thus, only the wealthy would benefit from its repeal. In 2016, the exemption for the estate tax was $5.45 million, far more than most families are able to pass on to their heirs. That tax only applied to 4,700 returns in 2013, according to a 2015 congressional report.

The proposal does lower the top personal income tax rate from 39.6 percent to 35 percent, although again, it's unclear who will be paying that tax. Right now, the highest tax rate of 39.6 percent applies to those earning at least $418,400. The Trump administration has said its plan includes the elimination of many credits and deductions, which often only the wealthy are able to take advantage of, but none of that is certain. The plan, for the most part, doesn't specify which credits and deductions it plans to eliminate.

The proposal is also likely to benefit wealthy business owners who have so-called "pass through" companies. The president's plan would set the tax rate for pass-through companies at 25 percent. Currently, most "pass-through" companies pay the individual tax rate their owners pay, which is, of course, currently much higher than 25 percent for wealthy business people.

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Patlal said:

I just watched the speech.

Low income earners will see benefit. Mom and pop business will see big benefits. The simplification part should benefit everyone.

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ballsalsa said:

The president's plan eliminates a deduction for state and local income taxes, meaning those in higher-tax states like California and New York will pay significantly more in taxes to the federal government.

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ballsalsa said:

ballsalsa said:

The president's plan eliminates a deduction for state and local income taxes, meaning those in higher-tax states like California and New York will pay significantly more in taxes to the federal government.

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They want to milk Ca and NY residents even harder than ever in order to subsidize tax cuts for the super-rich

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ballsalsa said:

They want to milk Ca and NY

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akira_akuma said:

ballsalsa said:

They want to milk Ca and NY

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are over socialized crap havens anyways, that always infinitely want more to spend on their programs which only hurt more than help.

also good for Trump making big corpo actually pay more, finally.

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akira_akuma said:

it's mildly decent. corporate tax rate is high enough, the problem is them not paying it.

now they will. good. i can work from there.

self-employment tax is still too high. (i opt for self-employment)

but business tax being lowered, it's gonna be good for the lower to middle class business...i still think start ups should be subsidized, seeing as the monopolies still have absolute rule over everything, but then again, they have to pay up, or get fucked. good.

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akira_akuma said:

they are always looking for bailout money too. how do you think the housing bubble happened...? where were all the tenements, erm, i mean, 'houses' "bought up", mostly?

oh right...New York and California.

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Quote:

Moving the goal posts instead of addressing my criticism of your original post. Okay.

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Most of the bailout money went to banks, but of that that went to states California and New York are the two highest. That's not unreasonable when you consider that those two states combined make up about 1/5 of the entire US population. Do you honestly think other states were somehow different when it came to the housing crash?

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Quote:

The housing crash wasn't even confined to the United States much less two states you disagree with politically, it was broad and systemic. It was caused by a lack of oversight of our regulatory agencies, a lack of responsibility of the bankers handing out the loans as well as those repackaging and selling them as investments, those who are supposed to be ranking the value of said loans, and of course those who took out the loans without understanding the ridiculous terms. It has nothing to do with social programs or ideologies.

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akira_akuma said:

they are always looking for bailout money too. how do you think the housing bubble happened...? where were all the tenements, erm, i mean, 'houses' "bought up", mostly?

oh right...New York and California.

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krypto2000 said:

akira_akuma said:

ballsalsa said:

They want to milk Ca and NY

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are over socialized crap havens anyways, that always infinitely want more to spend on their programs which only hurt more than help.

also good for Trump making big corpo actually pay more, finally.

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You do realize that CA and NY spend their own money on these social programs right? Your statement is effectively saying they should be punished because you don't agree with them idealogically, not because of anything they're doing to hurt other states. That's like saying people who support legal marijuana should pay more in taxes cuz 'fuck em' or something. What's your logic?

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qman said:

Like I said, the economy is structurally damaged. If we can't deport illegals then there's no hope for higher wages and stopping the lower standard of living.

This tax plan isn't even revenue neutral, it would cause even higher deficits and increase the already $20 trillion and growing debt.

Trump is fucked, just wait until the business cycle comes to and end in the next few years, we haven't seen anything yet.

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qman said:

Like I said, the economy is structurally damaged. If we can't deport illegals then there's no hope for higher wages and stopping the lower standard of living.

This tax plan isn't even revenue neutral, it would cause even higher deficits and increase the already $20 trillion and growing debt.

Trump is fucked, just wait until the business cycle comes to and end in the next few years, we haven't seen anything yet.

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