Tax Policy

[DougMacG]

This former House proposal is already dead, but the reasons need to be documented for future reference.

https://www.cato.org/publications/commentary/border-adjustment-tax-no-free-lunch

The Border-Adjustment Tax Is No Free Lunch

By Alan Reynolds
This article appeared on Investor’s Business Daily on June 16, 2017.
House Republican leaders Speaker Paul Ryan, R-Wis., and Ways and Means Chairman Kevin Brady, R-Texas, are still pushing their year-old scheme of a “border adjustable tax” (BAT) to exempt exports from their proposed 20% corporate tax while disallowing firms any deduction for the cost of imported parts, materials or inventories.

Congressmen Ryan and Brady claim the BAT will “level the playing field” which, in the plain English of Boston University economist Larry Kotlikoff, means “reducing the U.S. trade deficit.” The tax is also projected to raise $1 trillion over the next ten years. In other words, a “free lunch” that will pay for itself.

Unfortunately, if the tax truly is to raise $1 trillion dollars, it “cannot change the size of the trade deficit,” as BAT supporter and Harvard economist Martin Feldstein puts it. The BAT is a tax on the trade deficit, and would raise nothing if that deficit ceased to exist.

A BAT could wreak havoc on some of the largest employers in the country, including retailers and automakers.
Feldstein and other BAT advocates argue their plan won’t affect trade because it will drive the dollar up 25% and thus make imports cheap and U.S. exports costly.

The reason for the dollar’s assumed rise is that tax-free exports would rise, increasing the world’s demand for dollars, while newly taxed imports would fall, reducing the world dollar supply. The reason the trade deficit can’t change, in other words, is that imports and exports must first change quite a lot before the supposedly end up unchanged.

Why else would the dollar soar? Scholars may say that initial trade disruption is temporary, but they can’t tell us whether “temporary” means months or years.

The promised 10-year revenue windfall rests on a shaky foundation, and contradicts politicians’ promises of a level playing field. Yet foregoing that hypothetical treasure might mean “settling for a 25% corporate rate,” which isn’t ideal for Rep. Brady.

In reality, 25% under current law is about the same as 20% under the Ryan-Brady plan, which Goldman Sachs economists estimate has an effective rate of 24%. Why? Because the Ryan-Brady plan taxes costs as if they were income.

Companies could no longer deduct the cost of imports or interest, which makes a huge difference when imports or interest are an important cost of doing business. Former Treasury Secretary Larry Summers noted the Ryan-Brady tax could “substantially exceed 100% of profits” for large retail chains with thin margins who count on imports for much of their inventory.

Even in the same industry, a BAT would hit different firms differently. Refiners could still deduct the cost of Dakota crude oil under the BAT, but not Canadian crude. Manufacturers of electric motors could deduct the cost of Arizona copper, but not Chilean copper.

BAT proponents claim it is like a foreign VAT (value-added tax), but also entirely different. A VAT clearly raises consumer prices, for example, but BAT fans insist their plan won’t do that. A VAT applies equally to foreign and domestic goods, but a BAT only applies to imports.

BAT architect Alan Auerbach of U.C. Berkeley says retailers, refiners and automakers are wrong to worry; the 20% tax on corporate imports will be totally painless, because “a stronger dollar would make imports cheaper, offsetting the increase in taxes paid.”

Economists can’t predict exchange rates. But even if other currencies really did fall by 20%, there is no evidence import prices would fall nearly that much.

In a 2009 study for the U.S. International Trade Commission (ITC), Cathy Jabra surveyed the evidence and found that, aside from crude oil, very little of exchange rate changes were passed through to import prices. Only 18% of rate changes passed through in the case of consumer goods in general, only 12% for those from Japan and zero for imports from New Industrialized Economies such as China, Mexico and South Korea.

So even if all currencies did fall 20% against the dollar, prices of consumer goods might drop by only about 3.6%, rather than by the 20% required to make the BAT harmless. Prices of imports from the New Industrialized Economies might not fall at all.

Arguments for slapping a new border adjustment tax on corporate imports and exempting exports from the same are like running through a maze in Wonderland. The tax is said to level the playing field for trade and raise a ton of money, but that shimmering pot of gold on that horizon depends on trade being totally unaffected.

If these contradictory conjectures are half as mistaken as they appear to be, a BAT could wreak havoc on some of the largest employers in the country, including retailers and automakers. And if the U.S. economy goes down, tax revenue will too.

[DougMacG]

Who knew??

A new Tax Foundation report finds that the 1.5-cent-an-ounce levy that took effect in January is hurting low-income workers and producing less revenue than promised, is helping beer sales.

https://www.wsj.com/articles/philadelphias-soda-tax-bust-1502661280

It's okay to hurt low income workers, right, I mean if you're a well-intended, leftist-run city?

Tax it and get less of it, unexpectedly, that doesn't apply to capital, investment, employment, labor or private sector growth, does it?

[Crafty_Dog]

Ummm , , , IIRC generally we here (and certainly me) have advocated taxing what we don't want (in my advocacy this includes pollution) and not taxing what we do want (jobs, income, savings, capital gains, inheritance, etc.)

IIRC Philadelphia is one of the fattest cities in America- if not THE fattest city.

No surprise that revenues were less than predicated by people who don't get the Laffer Curve, but on the whole, I'm not seeing anything to get upset about here.

[Crafty_Dog]

The Morning Ledger: Republican Tax Plan Poses Risk to U.S. Bond Market
By Kimberly S. Johnson

Good morning. A tax revamp meant to boost U.S. competitiveness and bring overseas earnings home may weaken a central pillar of U.S. capital markets, writes Vipal Monga. Republican plans to scale back corporate interest deductions stand to push more borrowing overseas, eroding benefits of the mammoth U.S. bond market.
CONTENT FROM OUR SPONSOR


Large U.S.-based companies like Apple Inc. and Microsoft Corp. routinely borrow billions in U.S. markets even as they retain billions of dollars in cash, knowing that interest payments will lower their local tax bills. Any U.S. limits on interest deductibility would break with the policies in many other rich countries and likely prompt companies to shift some borrowing to places where deductibility would still be in effect, say analysts.

“If you remove interest deductibility in one location and retain it in others, then of course companies will want to move their borrowing,” said Matt King, a credit analyst at Citigroup Inc.

Non-financial, investment-grade companies in the U.S. have borrowed roughly $575 billion so far this year, on pace to break the record of close to $800 billion set in 2015, according to Dealogic.

Ending or limiting that deduction is key to funding the House tax plan. Repeal would raise $1.5 trillion over a decade to replace some of the revenue lost from a corporate rate cut and immediate deductions of capital expenses, according to the Tax Foundation, a conservative-leaning think tank.

Removing interest deductibility would create a “strange and ironic” echo of such “corporate inversion” strategies in which firms move their headquarters overseas but keep their main operations in the U.S., said Citigroup’s Mr. King. In this case, companies could keep their funds in the U.S. and borrow elsewhere.

[Crafty_Dog]

Making Growth Great Again
The GOP should learn from how Trump is selling supply-side tax cuts.
President Trump in Springfield, Mo., Aug. 30.
President Trump in Springfield, Mo., Aug. 30. Photo: Kevin Lamarque/Reuters
By Kimberley A. Strassel
Aug. 31, 2017 7:10 p.m. ET
85 COMMENTS

In May 2014, a broad collection of thinkers and politicians gathered in Washington to celebrate a new conservative “manifesto.” The document called for replacing stodgy old Reaganite economics with warmer, fuzzier handouts to the middle class. Donald Trump must have missed the memo.

The president formally opened the tax wars on Wednesday with his speech in Missouri challenging Congress to meet his principles for reform. The media almost uniformly applied to the speech its favorite (though misused) descriptor: “populist.” But the real news was that Mr. Trump wants to make Reagan-style tax reform great again.

The left saw this clearly, which explains its furious and frustrated reaction to the speech. “Trump’s New Tax Scam: Selling Plutocracy as Populism,” ran a headline in Vanity Fair, bemoaning that “Trickle-down is back, baby.” Democratic strategist Robert Shrum railed in a Politico piece that the “plutocrat” Mr. Trump was pitching a tax cut for “corporations and the top 1 percent” yet was getting away with a “perverted populism.” Trump voters had been “tricked into voting against themselves,” and now Mr. Trump was pulling a similar con with taxes.

Nonsense. Mr. Trump is selling pro-growth policies—something his party has forgotten how to do. And there’s nothing very “populist” about it, at least not by today’s political standards. The left has defined the tax debate for decades in terms of pure class warfare. Republicans have so often been cast as stooges for the rich that the GOP is scared to make the full-throated case for a freer and fairer tax system. It was precisely the right’s desire for a more “populist” tax policy that gave us the Reformicons and their manifesto for buying off the middle class.

Mr. Trump isn’t playing this game—and that’s why the left is unhappy. The president wants to reduce business tax rates significantly and encourage American companies to repatriate billions of profits held overseas. He wants to simplify the tax code in a way that will eliminate many cherished carve-outs. He wants tax relief for “middle income Americans,” though he also praised to the sky the 1986 Reagan reform that reduced the number of tax brackets and significantly lowered top marginal rates.

Mr. Trump did sneak a nod to Ivanka into the speech by including her proposal to hand out taxpayer money for child care. But his address was largely a hymn to supply-side economics, stunning Democrats who believed they’d forever dispelled such voodoo.

What made the left even more apoplectic was the president’s manner of sales pitch. What journalists always fail to note is the difference between “populist” policies and a “populist” delivery (of which Reagan was a master). Mr. Trump has defined himself as the protector of America’s forgotten man, an outsider to the swamp, an America Firster. The result is that he is uniquely qualified to sell a tax plan decried as “elitist” to average Americans.

[DougMacG]

Tax reform of 2017-2018 must now fight in the context that we already have $20 trillion of debt that has gained us nothing. https://www.cbsnews.com/news/national-debt-hits-historic-20-trillion-mark/

Besides liberals wanting tax rates even higher, plenty of so-called conservatives consider themselves to be deficit hawks and have a real fear of lowering the burden of big government.  For them and for all of us I would say, cut spending rates too!

Failing to reform our tax code guarantees that debt will grow faster than our economy until it finally takes us under.  The current tax code have been proven to limit growth to 1.6% max, making it impossible to grow beyond the burden of our ever increasing debt and balance our budget.  And failing to grow the economy will also guarantee electoral losses giving power back to the people who want to take more and stifle growth further.

This economy is capable of growing at two or three times the current growth rate - and compounding that growth in trillions of dollars, tens of thousands of businesses and millions of jobs.

Economic growth, not high taxation, is what fills our Treasury and balances our budget.

Static analysis (falsely) says that all tax rate cuts yield fewer dollars to Treasury.  In fixed-pie thinking, a 15% tax takes in less money than a 20% tax - all day long.  Stop there and ask why then are Algeria and Bolivia not swimming in government revenues?    As Carville-Clinton might say, it's the economy stupid.  Static analysis is the denial of incentive economics science.

Straw man arguments ridicule Laffer and Supply Siders for saying all tax rate cuts bring in more revenues.  That is NOT what the curve indicates.  A zero rate doesn't maximize revenues, nor does a 100% rate.  The question is, how do you maximize revenues while minimizing the negative impact of the disincentives that the taxes create.

Narrow academic analyses indicate that all tax rate cuts yield SOME recapture of revenues that the static analysis misses.  It takes a wider analysis to see the big picture of the entire economy.

Take a capital gains rate cut for example.  If the current top rate, federal plus state plus corporate plus ACA surcharge is stopping capital from moving to its most productive use, it is also stopping those most productive uses from employing people, putting or keeping millions out of the productive economy and onto a plethora of programs.

We mainstreamed the idea of not working to the point where 100 million adults do it and we don't even count most of them as unemployed.  We mainstreamed the idea of having the government pay your healthcare and other living expenses.  Meanwhile, we penalize entrepreneurs, employers and companies for making investments in plant and equipment that would allow people to move back to the productive economy.

We tax inflationary gains (oxymoron) as gains.  We create inflation and then feed off of the penalty, moving the private sector to public and changing the emphasis of the remaining investment dollars from long term to short term.  What could possibly go wrong with that?

Real tax reform is a paradigm shift.  Every dollar of income brings in less government revenue yet the total grows more with the economy than with the tax rate.

Previously on these pages, Coolidge, Kennedy, Reagan, Clinton and Bush all had tax rate cuts that yielded much higher revenue:

http://dogbrothers.com/phpBB2/index.php?topic=1791.msg103419#msg103419
http://dogbrothers.com/phpBB2/index.php?topic=1791.msg103568#msg103568
http://dogbrothers.com/phpBB2/index.php?topic=1791.msg105084#msg105084

http://www.heritage.org/node/18247/print-display
The tax rate cuts of the 1920s were followed by a 61% increase revenues over 7 years.
The Kennedy tax rate cuts brought a 62% increase in revenues over 7 years.
The Reagan tax rate cuts yielded a 54% increase over 6 years (100% over 10 years).

Bill Clinton's Presidency may give the best look at whether of not tax rates cuts benefit only the wealthy.  Clinton raised tax rates in 1983 and cut tax rates in 1997:  Real wages under Bill Clinton grew at 6.5 percent rate after the  capital gains tax rate cuts compared with 0.8 percent growth rate after his tax rate hikes of 1993.  
http://www.heritage.org/research/reports/2008/03/tax-cuts-not-the-clinton-tax-hike-produced-the-1990s-boom  
Real wages grew 8 times faster after tax rate cuts than after raising taxes on the wealthy.
And we balanced the budget.
Who knew?

[Crafty_Dog]

"Who knew?"

Well in addition to us here    Newt Gingrich and Art Laffer knew.

[DougMacG]

Coming out today, ZeroHedge has the details.  Some good features.  Overall, I'm not impressed.

http://www.zerohedge.com/news/2017-09-27/here-leaked-trump-tax-plan

[Crafty_Dog]

http://www.dailywire.com/news/21615/trumponomics-trump-tax-plan-proposes-tax-increase-ben-shapiro?utm_source=shapironewsletter&utm_medium=email&utm_content=092717-news-title&utm_campaign=lead

[DougMacG]

Underwhelming.  Some good features in it.  Mark Levin (on radio) summed up some observations that overlap mine:

1)  More and more people pay nothing at all.  No skin in the game.  Federal spending doesn't pay the bill.  Moral hazard: a reason to keep income low for life.  Political hazard:  that makes two parties that support having large numbers of people not pay their fair share.

2)  Trump offers a 4th tax bracket - for the "wealthiest", while bragging about only three brackets.  Surcharge on the wealthy.  Compare with Reagan for a moment.  Reagan cut the top rate from 70% to 28% and doubled revenues in a decade.  Reagan curt across the board.Trump is cutting top rate from 39.6 to 36, then add a surcharge, just like Pelosi-Obama in this regard.

3)  Play the class warfare game with the Democrats and you will lose it.  They are better at it.  You can't defeat wrong headed thinking by joining in with it.  The opponents aren't going to support it or support you  just because you throw them a bone or two.  Do what's right and explain it.  What is the most efficient formula to raise revenue for the public sector while maximizing growth and income in the private sector.

My other concerns:

4)  Does nothing with capital gains (that I can see).  Index 'gains' to inflation!

5)  Eliminating Blue State deductions will lose votes of blue state Republicans without winning any Democrat votes.  Our red state friends say we deserve this penalty, but 40-50% in the blue state don't favor the punishing rates in the first place, and now get a second hit.  A good compromise would be to eliminate the state income tax deduction but keep the property tax deduction.  How is it that supporting your local schools with tax dollars isn't tax deductible?  It isn't income available to pay federal taxes.

More info:
https://www.consumerreports.org/taxes/how-gop-tax-reform-plan-could-affect-you/

[G M]

Doug,

Move to where you and your money is treated better.

Underwhelming.  Some good features in it.  Mark Levin (on radio) summed up some observations that overlap mine:

1)  More and more people pay nothing at all.  No skin in the game.  Federal spending doesn't pay the bill.  Moral hazard: a reason to keep income low for life.  Political hazard:  that makes two parties that support having large numbers of people not pay their fair share.

2)  Trump offers a 4th tax bracket - for the "wealthiest", while bragging about only three brackets.  Surcharge on the wealthy.  Compare with Reagan for a moment.  Reagan cut the top rate from 70% to 28% and doubled revenues in a decade.  Reagan curt across the board.Trump is cutting top rate from 39.6 to 36, then add a surcharge, just like Pelosi-Obama in this regard.

3)  Play the class warfare game with the Democrats and you will lose it.  They are better at it.  You can't defeat wrong headed thinking by joining in with it.  The opponents aren't going to support it or support you  just because you throw them a bone or two.  Do what's right and explain it.  What is the most efficient formula to raise revenue for the public sector while maximizing growth and income in the private sector.

My other concerns:

4)  Does nothing with capital gains (that I can see).  Index 'gains' to inflation!

5)  Eliminating Blue State deductions will lose votes of blue state Republicans without winning any Democrat votes.  Our red state friends say we deserve this penalty, but 40-50% in the blue state don't favor the punishing rates in the first place, and now get a second hit.  A good compromise would be to eliminate the state income tax deduction but keep the property tax deduction.  How is it that supporting your local schools with tax dollars isn't tax deductible?  It isn't income available to pay federal taxes.

More info:
https://www.consumerreports.org/taxes/how-gop-tax-reform-plan-could-affect-you/

[Crafty_Dog]

I helped create the GOP tax myth. Trump is wrong: Tax cuts don’t equal growth.
The best growth in recent memory came after President Bill Clinton raised taxes in the ’90s.
By Bruce Bartlett September 28 at 9:30 AM

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."

Play Video 3:02

Trump’s speech on the GOP tax plan, in three minutes
During a speech in Indianapolis, Sept. 27, President Trump said the GOP tax plan is a “once-in-a-generation opportunity” to lower taxes on the middle class and businesses. (Bastien Inzaurralde/The Washington Post)

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.

Third, there was the simple bounce-back from the recession of 1981-82. Recoveries in the postwar era tended to be V-shaped — they were as sharp as the downturns they followed. The deeper the recession, the more robust the recovery.  (MARC: which did not kick in until the tax rate cuts finished phasing in)

Finally, I’m not sure how many Republicans even know anymore that Reagan raised taxes several times after 1981. His last budget showed that as of 1988, the aggregate, cumulative revenue loss from the 1981 tax cut was $264 billion and legislated tax increases brought about half of that back.

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.  (MARC:  The peace dividend from the collapse of the Soviet Empire, the cuts to the capital gains rate and other successes of the Gingrich Congress had quite a bit to do with this)

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 (Marc: NO IT DID NOT!) and the stock market has boomed — up around 10,000 points over the past five years. (Marc:  US economy under Obama was the first eight year stretch since the Depression that the economy did not have a 3% year.  Also arguably the zero rate interest policy drove savings into the stock market.)

Now, Republicans propose cutting the top individual rate to 35 percent, despite lacking evidence that this lower rate led to growth during the Bush years, and a drop in the corporate tax rate to just 20 percent from 35 percent. (Marc:  Necessary to compete with the lowered rates of other countries, not to mention the inversion issues as a sign of US tax code driving/keeping trillions of dollars off-shore)  Unlike 1986, however, this $1.5 trillion cut over the next decade will only be paid for partially by closing tax loopholes.

Republicans’ various claims are irreconcilable. One is that the rich will not benefit even though it is practically impossible for them not to — those paying the most taxes already will necessarily benefit the most from a large tax cut. And there aren’t enough tax deductions, exclusions and credits benefiting the rich that could be abolished to offset a cut in the top rate.

[Trump promised black voters equal justice. That’s all Kaepernick wants.]

Even if they had released a complete plan — not just the woefully incomplete nine-page outline released Wednesday — Republicans have failed to make a sound case that it’s time to cut taxes.

What’s in the GOP tax proposal
Republicans on Sept. 27 introduced a tax proposal that would deeply cut taxes but would also likely add to the national debt. (Danielle Kunitz, Bastien Inzaurralde/The Washington Post)

Nor have they signaled that they’ll commit to a viable process. It’s worth remembering that the first version of the ’81 tax cut was introduced in 1977 and underwent thorough analysis by the CBO and other organizations, and was subject to comprehensive public hearings. The Tax Reform Act of 1986 grew out of a detailed Treasury study and took over two years to complete.  (Marc:  Worth noting that back then between election campaigns there actually was bipartisan work being done see e.g. Reagan and Tip O'Neil)

Rushing through a half-baked tax plan, in the same manner Republicans tried (and failed) to do with health-care reform, should be rejected out of hand. As Sen. John McCain (R-Ariz.) has repeatedly and correctly said, successful legislating requires a return to the “regular order.” That means a detailed proposal with proper revenue estimates and distribution tables from the Joint Committee on Taxation, hearings and analysis by the nation’s best tax experts, markups and amendments in the tax-writing committees, and an open process in the House of Representatives and Senate.

There are good arguments for a proper tax reform even if it won’t raise GDP growth. It may improve economic efficiency, administration and fairness. But getting from here to there requires heavy lifting that this Republican Congress has yet to demonstrate. If they again look for a quick, easy victory, they risk a replay of the Obamacare repeal fight that wasted so much time and yielded so little.

[DougMacG]

Crafty already pointed this out in places, but Bruce Bartlett is wrong throughout.  The column is titled: "Republican trickle-down theory is lies" at USA Today.  Bold claim, myth wasn't strong enough?  Yet he doesn't identify a single lie and doesn't back up his own conclusions with any consistent or significant truth.  The role he claims he paid earlier draws attention to his turnabout but this doesn't stand up on substance, starting with the straw man title.

"Trickle down" is an anti-growth, straw man argument.  They say or imply the theory is to give money to the rich and hope it trickles down to the rest.  But in tax rate cutting, no one is giving money to anyone, we are just changing the formula of what you're allowed to keep of what you legally earned, trying to ease the brakes of a monstrosity of a hindrance. Shamefully, the top tax bracket in this isn't really going to be lowered anyway and capital gains aren't reformed either, all in the interest of appeasing jackasses like this.  But this article was most certainly written to respond to whatever Trump or the Republicans would come up with.

Is our current tax system is inhibiting growth?  [YES]  If so, how and by how much?  Scott Grannis has a chart with the growth gap with an area under the curve is in the tens of trillions.  Where is Bartlett's his math on that?  Is he saying 1.5% growth is maximum growth?  That is absurd IMHO.

Real growth in fiscal year 1984, the first full year after tax rate cuts was 6.8%.
https://www.forbes.com/sites/peterferrara/2011/05/05/reaganomics-vs-obamanomics-facts-and-figures/#9d8426a9ac95

No one can seriously argue that the potential for growth unleashed by reform isn't enormous.  This package doesn't get there, but in my view, we could certainly triple the growth rate from 1.5 to 4.5% if we successfully reformed taxes and regulations.  That kind of growth would change lives and balance budgets.

From the article:
Trump is wrong: Tax cuts don’t equal growth.  

These aren't "tax cuts" and they don't "equal growth", they are rate cuts and reforms that remove inhibitors to growth, like companies and business leaving our country.  That Trump can't articulate any of this is another matter.

The best growth in recent memory came after President Bill Clinton raised taxes in the ’90s.  

Patently false.  The growth rate by all measures was far better after Clinton lowered capital gains rates and reformed welfare later in his Presidency than after he raised tax rates.  Wages grew 6 times faster after tax rate cuts than after rate hikes.  Link for that is in this thread; I am happy to re-post it (again) anytime. Bartlett is inclined to conflate periods and ideas to draw wrong conclusions.

Reagan’s 1981 tax cut ... unleashed the American economy and led to an abundance of growth.   True, but he has his dates wrong.  The rate cuts were phased in delaying the effect to January 1, 1983.

...Based on this logic, tax cuts became the GOP’s go-to solution for nearly every economic problem.

Every significant tax rate cut has unleashed growth and economic growth is a far reaching solution.

Extravagant claims are made for any proposed tax cut.

No.  They are mostly under-sold.  Exactly the opposite is true.  Every tax rate cut is met with a false, static, CBO score that is plastered as 'gospel' all over the media even though CBO has been wrong 100% of the time.

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.”

If these really were aggressive and lasting reforms, the amount that economic growth would bring in over time would be in tens of trillions.  

There’s no evidence that a tax cut now would spur growth.  Companies and dollars fleeing, 100 million adults not working, zero growth for a decade, what would it take to call it 'evidence' that our government is crowding out our private sector?

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.

Oh good grief, is he really suggesting the 70s had a better economy than the 80s?  Does anyone long for the economy of the 70s?  His numbers for the 70s of course exclude the recession that followed (runners left on base) resulting from squeezing out the double digit inflation left by the 70s.  Even so, revenues to the Treasury doubled in the 80s, while the top rates dropped from 70% to 28%.  Think about how remarkable growth has to be to even bring in the same amount of revenue while multiplying by such a drastically lower tax rate.

If you don't believe me, then ask the voters of Reagan's time.  Reagan won 49 states in his reelection.  Carter of 70s growth lost 40 states in his reelection attempt.  And tax-raiser Walter Mondale became the first person to lose statewide contests in all 50 states, when he came back to lose the only state he won.  Growth rates under Reagan's rate cuts were far more than three times current rates.

There was the simple bounce-back from the recession of 1981-82. Recoveries in the postwar era tended to be V-shaped — they were as sharp as the downturns they followed. The deeper the recession, the more robust the recovery.

Why is that NOT HAPPENING NOW?
 
There is no evidence showing a boost in growth from the 1986 act.

During the entire period that the Reagan tax rates were left essentially intact we had a quarter century of growth that ended when the political arrow turned to pro-tax, anti-growth, and then economy then descended into a far deeper financila crisis and recession than the bad stock market day of 1987.

Strenuous efforts by economists to find any growth effect from the 1986 act have failed to find much.

On these pages we document the growth that came out of the Coolidge, Kennedy, Reagan, Clinton and Bush tax rate cuts, while he plays games with stats claiming the 70s were better than the 80s and the Clinton rate hikes spurred growth.

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.

What a convoluted thought, putting decade against decade instead of analyzing the effects of the policies.  REVENUES TO THE TREASURY grew by DOUBLE DIGITS after Bush tax rate were fully in effect and continued to grow at that rate until the economic outlook changed when Democrats swept the election in Nov 2006 promising to raise rates.  Their victory BTW was based more on a successful flipflop on the war in Iraq than it was on economics.

CBO says federal government revenues rose from $1.782 trillion in 2003 to $2.568 trillion in 2007 (using fiscal years). That’s a 44 percent increase.  (Left wing) Politifact says that increase came from economic growth, not lower rates.  What was to be demonstrated, has been.
http://www.politifact.com/punditfact/statements/2015/jun/17/ron-christie/gop-strategist-christie-tax-revenues-rose-after-bu/

Economy Grew at 7.2% Rate in 3rd Quarter (2003), Fastest Since 1984
https://mobile.nytimes.com/2003/10/30/business/economy-grew-at-72-rate-in-3rd-quarter-fastest-since-1984-2003103090520159778.html?referer=https://www.google.com/
(Newspaper of amnesia)

[ccp]

Doug really good analysis.

I am curios to see what the income brackets are going to look like.

I don't know why people in the bottom rung wind up paying 12 % rather then 10% .  Or why other likely will see no cuts.  Or if the state income tax deduction  is dropped how anyone in the middle will wind up with anything more then where they started

I also don't know why 47 % pay nothing.  Yet I am sure the MSM is happy to poll them on questions like :

should OTHERS pay more?

or why do have a right to participate in polls about taxes when you pay nothing.  I digress...   but if I see one more poll taken by popsugar or newsweek ....


also gotta love Dems when they  say this tax "cut" will balloon the deficit.  Suddenly the deficit is a major concern for them.

[DougMacG]

Doug really good analysis.

I am curious to see what the income brackets are going to look like.

I don't know why people in the bottom rung wind up paying 12 % rather then 10% .  Or why other likely will see no cuts.  Or if the state income tax deduction  is dropped how anyone in the middle will wind up with anything more then where they started

I also don't know why 47 % pay nothing.  Yet I am sure the MSM is happy to poll them on questions like :

should OTHERS pay more?

or why do have a right to participate in polls about taxes when you pay nothing.  I digress...   but if I see one more poll taken by popsugar or newsweek ....


also gotta love Dems when they  say this tax "cut" will balloon the deficit.  Suddenly the deficit is a major concern for them.

"I don't know why people in the bottom rung wind up paying 12 % rather then 10%"

Doubling the standard deduction takes care of this mathematically if not politically. 

"I also don't know why 47 % pay nothing."

That will take a real leader to call out the country on this. People like Trump and Romney are too personally vulnerable on the 'issue' of the 'rich' to take it on.  Like Bush, Dole Bush, McCain and Romney, Trump cannot articulate why marginal rates need to be lower.  Even Reagan could not articulate why everyone who is capable needs to have skin in the game.

Rush L used to say they had identified a group of Americans who are not paying their fair share... it's the poor!
That does not sell either, nor Romney conflating the 47% who do not pay in with the 47% who will never vote for him.  Different but overlapping groups.

This current lousy package has some good points that are still not fully developed.  If the top rate on S-corp pass through income is 25%, in a sense that becomes the new top rate.  Many loophole protectors will be thrown in to prevent that kind of 'abuse', high earners taking the 25% rate. 

There is no political will for it but a constitutional amendment should be passed that prevents spending above 20% of GDP without supermajority, emergency approval to exceed it and limit all federal marginal tax rates to 25%.  If you want more spending on yourself, then vote yourself more taxes, not impose them on others.  If you want more dollars to the Treasury, grow the economy, not penalize the participants.

A 25% rate still means a 35% rate in places like CA, NY, MN, NJ?  Tax rates higher than that enlarge the importance of income and tax avoidance.

Also missing in the plan is indexing capital gains to inflation.  Labor is nothing without capital and locking assets in place defines the opposite of a healthy, dynamic economy.

To think we can achieve optimum growth without reforming our monstrous tax code is to deny math, science and history.

[DougMacG]

Scott Grannis:  The media is full of stories claiming that lower tax rates will cause a huge and damaging increase in the federal deficit and will fail to stimulate the economy. Here are some charts which show that those claims are not backed by historical experience. On the contrary: worrying about tax cuts is not necessarily sensible at all.



http://scottgrannis.blogspot.com/2017/09/tax-and-deficit-scaremongering.html
----------------------------------------------------

The point I have tried to make on these pages is that even if there was no increase in revenues from a tax rate cut, it is phenomenally healthy for the economy to be able to take in the same amount at lower rates.  When you do that, you have done less harm in terms of forcing people to make economic decisions that move them away from earning and reporting income.  

If the rate drops 25% and the revenue stays the same, then pre-tax income has gone up by a theoretical 25% and take home by even more!  And beyond that, revenues do go up - historically.  Look at the Reagan years, the W Bush cuts, the Clinton capital gains rate cuts, the Kennedy cuts and the Coolidge for examples.  

How do critics answer that?  By conflating time periods, distracting with inequality data and by measuring tax % of GDP instead of dollars top the Treasury.

I'm happy to keep bringing this forward:
http://www.heritage.org/node/18247/print-display

The tax rate cuts of the 1920s were followed by a 61% increase revenues over 7 years.
The Kennedy tax rate cuts brought a 62% increase in revenues over 7 years.
The Reagan tax rate cuts yielded a 54% increase over 6 years (100% over 10 years).
Under Bill Clinton, Real wages grew 8 times faster after tax rate cuts later in his Presidency than earlier after he raised taxes on the wealthy.

[Crafty_Dog]

GOP eyes big prize for tax bill: Manchin's vote

Senate Majority Leader Mitch McConnell (R-Ky.) is making a bid for the support of Sen. Joe Manchin (W.Va.), a prominent centrist Democrat, on tax reform.

McConnell invited Manchin to his office shortly before the Columbus Day recess to talk about tax legislation, among other issues.

Manchin, who is running for reelection next year in a state that President Trump won in a landslide, is one of GOP’s top targets as they seek bipartisan support for their No. 1 legislative priority.

[DougMacG]

It would be a breakthrough to get all republicans and a few democrats make this bipartisan.  Win Manchin and Heitkamp and NOT lose Collins , Murkowski, etc. 

If not and they don't care about reforming this country, let there be consequences.

[DougMacG]

A friend dragged me into reading and commenting on Paul Krugman's latest NYT column.
https://krugman.blogs.nytimes.com/2017/10/14/lies-lies-lies-lies-lies-lies-lies-lies-lies-lies/?_r%3D0&source=gmail&ust=1508378025073000&usg=AFQjCNGkaBLY25QyycKRmiPDkQFHYxjGDg

Krugman the Nobel laureate opens his column by calling all conservatives liars and backs it up with Trump mis-speaks and his own distortions, see below.  You would think his standard for accuracy and honesty would be at precision level in a column about his opponents titled, 'Lies, lies, lies, lies, lies, lies, lies, lies, lies, lies'.  His civility isn't above Trump's either.  

(Krugman, quoting Trump I presume) Lie #1: America is the most highly-taxed country in the world

If Trump said that, he's wrong, unless the context was our corporate tax rates that are highest in the developed world where we are 60% higher than the OECD average.  More than 80% higher in MN!)   The US was second highest to Japan before they began cutting theirs:  https://www.reuters.com/article/us-japan-economy-tax/japan-to-cut-corporate-tax-rate-to-29-74-percent-in-two-stages-sources-idUSKBN0TV02D20151212

Our corporate tax rates are higher than so-called Communist China where they have rates of 25% and 15% for  government preferred enterprises.  
https://www.pwchk.com/en/services/tax/publications/wwts-201718.html  

By coincidence, China's falling GDP growth rate is still many times greater than the US economy in recent years.  https://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG
Let's not confuse correlation with causation, but over-taxation on employers isn't helping our workers.

Lie #2: The estate tax is destroying farmers and truckers

Besides morally offensive (at least to some), taking people's after-tax savings when they die is one of many forces working against the formation of capital.  The defense that it only applies to very few others, not you, fails any reasonable test of equal protection under the law.  Our government isn't stopping all capital formation, but at as we win the war against capital, labor and middle income people suffer more than the rich.  See Republic of the Congo, and Venezuela.

Lie #4: Cutting profits taxes really benefits workers

Maybe the reverse is easier to understand.  Take away too large a share of the return on capital and labor suffers.  Every time.  Capital employs labor.  In a free country you can be on either side of that, or both.

Lie #5: Repatriating overseas profits will create jobs

Again, look at the reverse.  Companies, dollars and innovation leaving the US hurts jobs here. Who disputes that? Money and jobs going overseas is only one sign of a disincentive system run amok.  Companies that never started and jobs that were never created are hard to measure.

"Medtronic joined a parade of prominent U.S. companies that have set up operations overseas to lower their tax bills."  
http://www.startribune.com/medtronic-now-based-in-ireland-still-reaps-u-s-benefits/392895471/

Lie #7: It’s a big tax cut for the middle class

Earners at the top pay the vast majority of the federal income taxes, before and after any tax reform.  Therefore we should never reform taxes?  There is no reform of a disincentive system that doesn't benefit those who are most invested.  Saying the rich will keep more of what they earn doesn't mean they will pay less in taxes in a dynamic economy.  (See Clinton's results below.)  

People who pay little or no federal income tax are hurt more than the rich when over-taxation hinders growth.  The rich can hold  assets instead of capturing gains - or keep the old yacht.  They can pay high taxes out of income and cash flow.  But all of us pay the price of opportunities not created when growth stops.  Lack of economic growth is what caps wages.  When no one competes for your labor, your wage does not go up.  Real wages and median wages were not helped in recent years by class warfare talk or implementing the policies of anti-growth.  When we're done fighting each other ("middle class interests vs. the top 1%"), maybe we can get on with what Democrats a generation ago used to call, "a rising tide lifts all boats".

Lie #9: Cutting taxes will jump-start rapid growth

Krugman: "For Bill Clinton raised taxes, amid cries from the right that he would destroy the economy. Instead he presided over a boom that surpassed Reagan in every dimension. For what it’s worth, I don’t think this boom was Clinton’s doing. But it certainly refuted the proposition that cutting taxes is both necessary and sufficient for prosperity."

Bill Clinton's Presidency is a good period to compare tax policies since he both raised tax rates early and lowered them later.  When Clinton raised rates in 1983, we continued a slow recovery already underway with below average growth.  When Clinton lost Congress, he changed course.  Unmentioned by Krugman, Bill Clinton "ended welfare as we know it" and cut the highest capital gains tax rate to 20% in 1997.  What were the results (and where are Democrats on that now)?
https://www.washingtonpost.com/news/wonk/wp/2012/09/05/the-clinton-economy-in-charts/?utm_term=.33bbc790b05f


Real wages under Bill Clinton grew at 0.8 percent growth rate after the tax rate hikes and grew at 6.5 percent rate after the capital gains tax rate cuts.  Wages grew 8 times faster after tax rate cuts.  While calling others liars, Krugman is happy to draw a circle around the entire period and attribute Clinton's best success to his least effective policy.  That's not liberal; that's dishonest.

Lie #10: Tax cuts will pay for themselves

What is the history on that?

The tax rate cuts of the 1920s were followed by a 61% increase revenues over 7 years.
The Kennedy tax rate cuts brought a 62% increase in revenues over 7 years.
The Reagan tax rate cuts yielded a 54% increase over 6 years.

After Bill Clinton cut the capital gains tax rate, capital gains revenues surged from $54 billion in 1996 to $99 billion in 1999.  



Revenues surged 60% in 4 years under Bush tax rate cuts.  One news story:
http://www.nytimes.com/2005/07/13/business/sharp-rise-in-tax-revenue-to-pare-us-deficit.html
Who knew?  (Paul Krugman doesn't read the NYTimes or OMB data?)

Job growth ended exactly as Bush's opponents won congress promising to reverse the rate reductions.  (Correlation is not causation, but that's when it happened.)


The crash occurred when the effects of our misguided policies caught up with us.  The federal government with a 90% market share in the mortgage market pressured lenders to lend on criteria other than creditworthiness and when daylight peeked through the house of cards fell.  

It is very Trump-like of Krugman to call a multi-year, double digit surge in revenues a "lackluster recovery", imply tax rate reductions caused the crash and higher tax rates fuel growth.  

Don't take investment advice from this guy either.
http://dailycaller.com/2016/11/09/paul-krugman-says-markets-will-never-recover-from-trump-dow-hits-record-high/

[G M]

https://www.efe.com/efe/english/world/venezuela-raises-taxes-on-wealthy-big-business/50000262-2801473

http://money.cnn.com/2017/04/30/news/economy/venezuela-minimum-wage-hike/index.html

Hey! Can you argue with success, Doug?

A friend dragged me into reading and commenting on Paul Krugman's latest NYT column.
https://krugman.blogs.nytimes.com/2017/10/14/lies-lies-lies-lies-lies-lies-lies-lies-lies-lies/?_r%3D0&source=gmail&ust=1508378025073000&usg=AFQjCNGkaBLY25QyycKRmiPDkQFHYxjGDg

Krugman the Nobel laureate opens his column by calling all conservatives liars and backs it up with Trump mis-speaks and his own distortions, see below.  You would think his standard for accuracy and honesty would be at precision level in a column about his opponents titled, 'Lies, lies, lies, lies, lies, lies, lies, lies, lies, lies'.  His civility isn't above Trump's either.  

(Krugman, quoting Trump I presume) Lie #1: America is the most highly-taxed country in the world

If Trump said that, he's wrong, unless the context was our corporate tax rates that are highest in the developed world where we are 60% higher than the OECD average.  More than 80% higher in MN!)   The US was second highest to Japan before they began cutting theirs:  https://www.reuters.com/article/us-japan-economy-tax/japan-to-cut-corporate-tax-rate-to-29-74-percent-in-two-stages-sources-idUSKBN0TV02D20151212

Our corporate tax rates are higher than so-called Communist China where they have rates of 25% and 15% for  government preferred enterprises.  
https://www.pwchk.com/en/services/tax/publications/wwts-201718.html  

By coincidence, China's falling GDP growth rate is still many times greater than the US economy in recent years.  https://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG
Let's not confuse correlation with causation, but over-taxation on employers isn't helping our workers.

Lie #2: The estate tax is destroying farmers and truckers

Besides morally offensive (at least to some), taking people's after-tax savings when they die is one of many forces working against the formation of capital.  The defense that it only applies to very few others, not you, fails any reasonable test of equal protection under the law.  Our government isn't stopping all capital formation, but at as we win the war against capital, labor and middle income people suffer more than the rich.  See Republic of the Congo, and Venezuela.

Lie #4: Cutting profits taxes really benefits workers

Maybe the reverse is easier to understand.  Take away too large a share of the return on capital and labor suffers.  Every time.  Capital employs labor.  In a free country you can be on either side of that, or both.

Lie #5: Repatriating overseas profits will create jobs

Again, look at the reverse.  Companies, dollars and innovation leaving the US hurts jobs here. Who disputes that? Money and jobs going overseas is only one sign of a disincentive system run amok.  Companies that never started and jobs that were never created are hard to measure.

"Medtronic joined a parade of prominent U.S. companies that have set up operations overseas to lower their tax bills."  
http://www.startribune.com/medtronic-now-based-in-ireland-still-reaps-u-s-benefits/392895471/

Lie #7: It’s a big tax cut for the middle class

Earners at the top pay the vast majority of the federal income taxes, before and after any tax reform.  Therefore we should never reform taxes?  There is no reform of a disincentive system that doesn't benefit those who are most invested.  Saying the rich will keep more of what they earn doesn't mean they will pay less in taxes in a dynamic economy.  (See Clinton's results below.)  

People who pay little or no federal income tax are hurt more than the rich when over-taxation hinders growth.  The rich can hold  assets instead of capturing gains - or keep the old yacht.  They can pay high taxes out of income and cash flow.  But all of us pay the price of opportunities not created when growth stops.  Lack of economic growth is what caps wages.  When no one competes for your labor, your wage does not go up.  Real wages and median wages were not helped in recent years by class warfare talk or implementing the policies of anti-growth.  When we're done fighting each other ("middle class interests vs. the top 1%"), maybe we can get on with what Democrats a generation ago used to call, "a rising tide lifts all boats".

Lie #9: Cutting taxes will jump-start rapid growth

Krugman: "For Bill Clinton raised taxes, amid cries from the right that he would destroy the economy. Instead he presided over a boom that surpassed Reagan in every dimension. For what it’s worth, I don’t think this boom was Clinton’s doing. But it certainly refuted the proposition that cutting taxes is both necessary and sufficient for prosperity."

Bill Clinton's Presidency is a good period to compare tax policies since he both raised tax rates early and lowered them later.  When Clinton raised rates in 1983, we continued a slow recovery already underway with below average growth.  When Clinton lost Congress, he changed course.  Unmentioned by Krugman, Bill Clinton "ended welfare as we know it" and cut the highest capital gains tax rate to 20% in 1997.  What were the results (and where are Democrats on that now)?
https://www.washingtonpost.com/news/wonk/wp/2012/09/05/the-clinton-economy-in-charts/?utm_term=.33bbc790b05f


Real wages under Bill Clinton grew at 0.8 percent growth rate after the tax rate hikes and grew at 6.5 percent rate after the capital gains tax rate cuts.  Wages grew 8 times faster after tax rate cuts.  While calling others liars, Krugman is happy to draw a circle around the entire period and attribute Clinton's best success to his least effective policy.  That's not liberal; that's dishonest.

Lie #10: Tax cuts will pay for themselves

What is the history on that?

The tax rate cuts of the 1920s were followed by a 61% increase revenues over 7 years.
The Kennedy tax rate cuts brought a 62% increase in revenues over 7 years.
The Reagan tax rate cuts yielded a 54% increase over 6 years.

After Bill Clinton cut the capital gains tax rate, capital gains revenues surged from $54 billion in 1996 to $99 billion in 1999.  



Revenues surged 60% in 4 years under Bush tax rate cuts.  One news story:
http://www.nytimes.com/2005/07/13/business/sharp-rise-in-tax-revenue-to-pare-us-deficit.html
Who knew?  (Paul Krugman doesn't read the NYTimes or OMB data?)

Job growth ended exactly as Bush's opponents won congress promising to reverse the rate reductions.  (Correlation is not causation, but that's when it happened.)


The crash occurred when the effects of our misguided policies caught up with us.  The federal government with a 90% market share in the mortgage market pressured lenders to lend on criteria other than creditworthiness and when daylight peeked through the house of cards fell.  

It is very Trump-like of Krugman to call a multi-year, double digit surge in revenues a "lackluster recovery", imply tax rate reductions caused the crash and higher tax rates fuel growth.  

Don't take investment advice from this guy either.
http://dailycaller.com/2016/11/09/paul-krugman-says-markets-will-never-recover-from-trump-dow-hits-record-high/

[DougMacG]

Treasury Secretary Andrew Mellon, 1924:
The history of taxation shows that taxes which are inherently excessive are not paid. The high rates inevitably put pressure upon the taxpayer to withdraw his capital from productive business and invest it in tax-exempt securities or to find other lawful methods of avoiding the realization of taxable income. The result is that the sources of taxation are drying up; wealth is failing to carry its share of the tax burden; and capital is being diverted into channels which yield neither revenue to the Government nor profit to the people.

http://www.heritage.org/node/18247/print-display

Valuable resource, read his book on taxation free at:
https://archive.org/stream/taxationthepeopl033026mbp#page/n23/mode/2up

He was right.

Tax rates were slashed dramatically during the 1920s, dropping from over 70 percent to less than 25 percent. What happened? Personal income tax revenues increased substantially during the 1920s, despite the reduction in rates. Revenues rose from $719 million in 1921 to $1164 million in 1928, an increase of more than 61 percent.

[DougMacG]

This (below) is thomas Sowell writing in 2012, quoting Andrew Mellon from 1924.  Some things never change.  George Gilder explained his move away from economics:  I thought we won that argument.  With the liberal left, an argument is never won.  They keep pounding the same old failed ideas nearly a century later.  Tediously, we need to keep answering them.

If you are a liberal, you want your country to collect dollars, not percentages of something, to pay for programs.  The right tax strategy for you is to maximize the dollars, not the percentage of something, coming in.  Countries maximize government revenues by having a healthy and dynamic sector, not by killing it. 

If you are a leftist, cf. Obama, you want high rates on the rich for other purposes, to win elections or sabotage capitalism, enact social change.  Rules for radicals.  That is another matter.  Let's get the facts straight and call out these activists like Krugman on their falsehoods, deceptions and/or radical intentions.  Growing the American economy should be a bipartisan endeavor.

Ordinary, well meaning Dems in your family, friends and neighborhood are mostly not leftists trying to take down the country, but they are being led, educated and influenced by people who are.  Spread the word; they aren't going to read any of this in the NYT or hear it on NPR.

http://jewishworldreview.com/cols/sowell052312.php3#.Wei7CWhSyyI

A Book for Republicans   5/23/2012
By Thomas Sowell

http://www.JewishWorldReview.com | Democrats have been having a field day with the cry of "tax cuts for the rich" — for which Republicans seem to have no reply. This is especially surprising, because Democrats made the same arguments back in the 1920s, and the Republicans then not only had a reply, but one that eventually carried the day, when the top tax rate was brought down from 73 percent to 24 percent.
What was the difference then?

The biggest difference is that Secretary of the Treasury Andrew Mellon took the trouble to articulate the case for lower tax rates, in articles that appeared in popular publications, using plain language that ordinary people could understand. Seldom do Republican leaders today even attempt to do any such thing.

In 1924, the ideas from these articles were collected in a book which Mellon titled "Taxation: The People's Business." That book has recently been reprinted by the University of Minnesota Law Library. Today's Republicans would do well to get a copy of Mellon's book, which shows how demagoguery about "tax cuts for the rich" can be exposed for the nonsense that it is.

People in the media could also benefit by seeing how the "tax cuts for the rich" demagoguery collapses like a house of cards when you subject it to logic and evidence.
Those who argue that "the rich" should pay a higher tax rate, and that the revenue this would bring in could be used to reduce the deficit, assume that higher tax rates equal higher tax revenues. But they do not.

Secretary Mellon pointed out that previously the government "received substantially the same revenue from high incomes with a 13 percent surtax as it received with a 65 percent surtax." Higher tax rates do not mean higher tax revenues.

High tax rates on high incomes, Mellon said, lead many of those who earn such incomes to withdraw their money "from productive business and invest it in tax-exempt securities" or otherwise find ways to avoid receiving income in taxable forms.

That is even easier to do today than in Andrew Mellon's time. The very same liberals who complain that Mitt Romney — among thousands of others — puts his money in the Cayman Islands nevertheless act as if raising the tax rates automatically raises tax revenues. It can instead drive money out of the country and drive jobs out of the country with it.

The United States has long been a place where foreigners from around the world have sent their money to be invested, more than offsetting the money that Americans invested abroad. But, in recent years, the net flow of investment is out of America to places overseas that don't tax as much.

Mellon cited statistics that showed the opposite of what the high-tax advocates claimed. Although incomes in general were rising from 1916 to 1921, the taxable income of people earning $300,000 and up dropped by about four-fifths.

That didn't mean that "the rich" were becoming poor. It meant that they had arranged to receive their incomes in forms that were not taxable. Mellon asked where the money of these high income earners went. He answered: "There is no doubt of the fact that much of it went into tax-exempt securities." In today's global economy, much of it can also easily be sent overseas — much more easily than workers can go overseas to get the jobs this money creates in other countries.

After Mellon finally succeeded in getting Congress to lower the top tax rate from 73 percent to 24 percent, the government actually received more tax revenues at the lower rate than it had at the higher rate. Moreover, it received a higher proportion of all income taxes from the top income earners than before.

Something similar happened in later years, after tax rates were cut under Presidents Kennedy, Reagan and G.W. Bush. The record is clear. Barack Obama admitted during the 2008 election campaign that he understood that raising tax rates does not necessarily mean raising tax revenues.

Why then is he pushing so hard for higher tax rates on "the rich" this election year (2012)? Because class warfare politics can increase votes for his reelection, even if it raises no more tax revenues for the government.
---------------------
Same is true today.  The rhetoric war of 'taxes on the rich vs the middle class' is waged to lock in Democratic votes, not to increase dollars to the Treasury, the median wage, or the take home pay of a worker or voter.

They lowered the top rate (in the 20s) by 2/3rds and revenues surged.  The rich actually paid a higher proportion of the total taxes at the lower rate.  Isn't that what liberals want??

Counter-intuitive?  Yes.  So what.  All of liberalism is first level thinking.  We must challenge people to look and think past that - or we lose.

[ccp]

tax experts:

https://pjmedia.com/video/trumps-tax-plan-called-bernie-sanders-plan/

[ccp]

https://townhall.com/columnists/walterewilliams/2017/10/18/who-pays-what-in-taxes-n2395681

[DougMacG]

Letter sent today to my congressman on the House Ways and Means Committee:

Index Long Term Capital Gains to Inflation.

It's simple.  It costs nothing.  It's fair.  It helps the little guy, people saving and investing for the long term.  

It frees up assets to move to their most valuable and productive use. Isn't that the definition of free market capitalism?

It gives tax reform another favorable talking point.

It's easy; the CPI 'Cola' is already published by the government.  Have it apply only to assets held 5 years, 7, 10 or whatever...  It doesn't have to muddle up the code.

When people sell a long term holding, the government gets a share.  When they don't sell, hold until stepped up value at death because of punitive tax consequences, government gets nothing.  

Here's a personal example even though this is not about me.  I bought a house for 35,000 in 1981.  Adjust for the value of the dollar and my basis is really 96,000.  Zillow says it is worth  135,000.  With an inflation adjusted basis, I sell and the government receives a reasonable percentage of a reasonable gain, and a new buyer gets a house. 
 Win, win, win.   Under the current system, the tax rate on the real gain is WAY over 100%.  No rational person would sell and the government gets zero on the capital gain not realized.

If the people who serve us on the House Ways and Means Committee don't address this now, who will and when??

Take a good bill and make it a great!

[Crafty_Dog]

https://www.investors.com/politics/editorials/democrats-attack-gop-plan-to-eliminate-state-and-local-tax-deductions-in-tax-cut-plan/

[DougMacG]

"The tax code should be an exercise in civic responsibility in which all participate to pay for the legitimate functions of government."
https://townhall.com/columnists/starparker/2017/11/01/free-the-tax-code-from-special-interests-n2403048?utm_source=thdaily&utm_medium=email&utm_campaign=nl&newsletterad=

Words not lately uttered in Washington.

[Crafty_Dog]

High on Incentives
California learns a lesson in taxes from marijuana.
Photo: istock/Getty Images
By The Editorial Board
Nov. 1, 2017 7:27 p.m. ET
0 COMMENTS

Whatever its enjoyments, marijuana is not typically associated with sharper thinking. But in California, where recreational pot was legalized last year, citizens now have a much clearer view of the unintended consequences that come from high tax rates.

A new report from the global credit-rating firm Fitch Ratings highlights the effect of California’s high taxes on the marijuana market. The combined local and state rate on non-medical cannabis may be as high as 45% in some places, and Fitch says this acts as an incentive for Californians to shun legal pot dealers who pay the tax in favor of black-market sellers who don’t and can charge lower prices. As America’s largest producer of marijuana, California also risks driving business outside its own borders to lower-taxed states.

The irony is that one argument for legalizing pot has been to reduce illegal trafficking. But by imposing taxes that are too high on legal weed, politicians give pot heads an incentive to go back on the illegal market. This will come as no surprise to anyone who has followed the boon to illegal smokes from high cigarette taxes in places like New York City.

But old arguments always bear relearning, especially in precincts where understanding about market incentives is, well, not high. Hats off to Fitch Ratings for making the argument in terms even Marin County can understand.

[DougMacG]

https://taxfoundation.org/details-tax-cuts-jobs-act/

Read the tables at the link.

Individual Income Taxes

Tax Brackets
Consolidates the current seven brackets into four, with a bottom rate of 12 percent (aided by a higher standard deduction) while retaining the current top marginal rate of 39.6 percent. An income capture provision (“bubble rate”) will phase out the 12 percent bracket for filers with income in excess of $1,000,000 ($1,200,000 for joint filers).

Single
Married
Head of Household
12.0% > $0
12.0% > $0
12.0% > $0
25.0% > $45,000
25.0% > $90,000
25.0% > $67,500
35.0% > $200,000
35.0% > $260,000
35.0% > $230,000
39.6% > $500,000
39.6% > $1,000,000
39.6% > $500,000
Indexing Provisions
Indexes tax bracket and other provisions to the Chained CPI measure of inflation.

Standard Deduction
Increases the standard deduction to $12,000 for single filers, $18,000 for heads of household, and $24,000 for joint filers (currently $6,350 for single filers, $9,350 for heads of households, and $12,700 for married filers). Eliminates the additional standard deduction and the personal exemption.

Itemized Deductions
Retains the mortgage interest and charitable deductions, as well as the property tax deduction (capped at $10,000), but repeals the remainder of the state and local tax deduction and other itemized deductions.
Other Deductions and Exclusions
Caps the mortgage interest deduction at $500,000 of principal for new home purchases. Eliminates the moving deduction, educator expense deduction, and exclusions for employer-dependent care programs, among others. Makes changes to the exclusion of capital gains on home sales.

Family Tax Credits
Replaces the personal exemption for dependents with an expansion of the child tax credit from $1,000 to $1,600, while increasing the phaseout threshold (from $115,000 to $230,000 for married filers). The first $1,000 would be refundable, increasing with inflation up to the $1,600 base amount. Also creates a new $300 nonrefundable personal credit and a $300 nonchild dependent nonrefundable credit, subject to phaseout. The $300 credit expires after 5 years.

Alternative Minimum Tax
Eliminates the individual alternative minimum tax.
Business Taxes

Corporate Tax Rate
Lowers the corporate income tax rate from 35 to 20 percent.
Pass-Through Rate
Creates a new 25 percent maximum tax rate on pass-through business income, subject to anti-abuse rules.

Pass-Through Anti-Abuse Rules
Begins with assumption that 70 percent of income derived from a business is compensation subject to ordinary rates and 30 percent is business income subject to the maximum 25 percent rate for active owners. Businesses can “prove out” of the 70/30 split based on demonstrated return on business capital at the short-term applicable federal rate (AFR) plus 7 percent. Certain specified service industries, like health, law, financial services, professional services, and the performing arts are excluded from the 70/30 split and can only claim the benefit of the lower pass-through rate to the extent that they can “prove out” their business income.

Capital Investment
Allows full expensing of short-lived capital investment (currently subject to “bonus” depreciation), such as equipment and machinery, for five years. Increases Section 179 expensing from $500,000 to $5 million and increases the phaseout threshold from $2 million to $20 million.
Tax Treatment of Interest
Limits the deductibility of net interest expense on future loans to 30 percent of earnings before interest, taxes, depreciation, and amortization (EBITDA), with a five-year carryforward, for all businesses with gross receipts of $25 million or more.
Net Operating Loss Provisions
Allows Net Operating Losses (NOLs) to be carried forward indefinitely and increased by a factor reflecting inflation and the real return to capital, while restricting the deduction of NOLs to 90 percent of current year taxable income and eliminating NOL carrybacks, except for one-year carrybacks for certain disaster losses.

Business Credits and Deductions
Eliminates the Section 199 manufacturing deduction and the New Market Tax Credit, along with like-kind exchanges for personal property (retained for real property), and deductions for entertainment. Eliminates credits for orphan drugs, private activity bonds, energy, rehabilitation, and contributions for capital, among others.

Alternative Minimum Tax
Eliminates the corporate alternative minimum tax.

International Income
Moves to a territorial tax system, in which foreign-source dividends and profits of U.S. companies are not subject to U.S. tax upon repatriation. However, 50 percent of excess returns (those greater than a routine return, defined as AFR plus 7 percent) earned by controlled foreign corporations (CFCs) are included in U.S. shareholders’ gross income. In addition, payments made from US corporations to a related foreign corporation are subject to a 20 percent excise tax unless the US corporation claims the transaction as effectively connected income (ECI). ECI is added to the taxable income of the US corporation, but the related foreign corporation’s expenses can be deducted from this income.

Deemed Repatriation
Enacts deemed repatriation of currently deferred foreign profits, at a rate of 12 percent for cash and cash-equivalent profits and 5 percent for reinvested foreign earnings.

Estate Tax
Increases the estate tax exemption to $10 million, which is indexed for inflation, and repeals the estate tax after six years.

[ccp]

tax benefits for businesses only  and

for individuals it seems like a bait and switch and another shaft

What kind of shit is this?

[Crafty_Dog]

Disagree.

In that the corporate tax is passed on to customers in the form of higher prices it is, in essence a flat tax on everyone thus cutting it is perhaps the only way to give a tax cut to everyone.

Think on this.

[ccp]

"In that the corporate tax is passed on to customers in the form of higher prices it is, in essence a flat tax on everyone thus cutting it is perhaps the only way to give a tax cut to everyone."

You assuming that lower corporate taxes will be passed on to consumers in the form of lower prices.

I think more jobs will result but I think you are overly optimistic to think we will get much in the way of lower prices.

" perhaps the only way to give a tax cut to everyone "

maybe but sound  like the trick with the little ball and 3 cups and bait and switching if you ask me.

[G M]

Disagree.

In that the corporate tax is passed on to customers in the form of higher prices it is, in essence a flat tax on everyone thus cutting it is perhaps the only way to give a tax cut to everyone.

Think on this.

You can't tax a business, you can only tax the customers of that business.

[ccp]

"You can't tax a business, you can only tax the customers of that business."

I suppose we might get lower prices from increase competition but I for one am not holding my breath

taxpayers are screwed again in my opinion.

Trump promised *everyone* will get tax breaks

The Republican cowards have put a stop to it.

[Crafty_Dog]

"You assuming that lower corporate taxes will be passed on to consumers in the form of lower prices."

Yup, pretty much.

The market has already revealed for how much profit they are willing to work, so unless there are oligopolistic/monopolistic dynamics involved then in follows a universal cost reduction will lead to universally lower prices.

[ccp]

https://www.conservativereview.com/articles/the-gop-income-tax-plan-is-too-clever-by-half

[DougMacG]

CCP, this tax plan gets it half right.  On the other half, it fails to lower individual rates for you and it fails to lower capital gains rates for me.

But it will grow the economy and that is good.

The question of the moment is, are we better off to pass this plan or not pass it.

The reason we are better off to pass it, is that it will grow the economy and help to win the next election, therefore making it possible to come back and do the other half.

Politics doesn't allow us to just tax less because we aren't willing to spend less. And politics doesn't allow us to redistribute less until we change the narrative.

[ccp]

I agree it is certainly better to get it half right and pass this vs doing nothing.

However that will be the end of further tax reform and the other half will never get done.

This may the only chance for any foreseeable future of getting it right and the best the cans can do is get it "half right"

The possible loss of the SALT deduction will certainly hurt me in a blue state like Jersey but the overall implications of moving political pressure onto the State and Locals pols for their punitive high taxes is very appealing.

[G M]

I agree it is certainly better to get it half right and pass this vs doing nothing.

However that will be the end of further tax reform and the other half will never get done.

This may the only chance for any foreseeable future of getting it right and the best the cans can do is get it "half right"

The possible loss of the SALT deduction will certainly hurt me in a blue state like Jersey but the overall implications of moving political pressure onto the State and Locals pols for their punitive high taxes is very appealing.

Sorry, but there is collateral damage in war.

[ccp]

" Sorry, but there is collateral damage in war.  "

Yeah

I guess you can say I was a civilian whose house got bombed because it was too close to the enemy arms depot that needed to be "taken out".

Shouldda stayed in Florida.

[ccp]

The *business tax cut* to focus what it really does:

Compared to the Reagan cut :

http://www.foxbusiness.com/politics/2017/11/04/how-new-gop-tax-reform-plan-compares-to-reagans.html

for individuals, there is NO comparison.

[G M]

" Sorry, but there is collateral damage in war.  "

Yeah

I guess you can say I was a civilian whose house got bomber because it was too close to the enemy arms depot that needed to be "taken out".

Shouldda stayed in Florida.

I would strongly recommend moving to a better environment than a coastal blue state for a variety of reasons.

[Crafty_Dog]

I concur with ending the state and local tax deduction.

[ccp]

" I concur with ending the state and local tax deduction "

Isn't Kalifornicate its tax paying citizens have even higher taxes then NJ?

[DougMacG]

ccp:  "However that will be the end of further tax reform and the other half will never get done."

Doug:  "... until we change the narrative."
------------------------------------------------

Let's say this passes before year end and goes into effect Jan 1 of a Congressional election year.  In addition to that, Trump and the Republicans have already done a large number of small things to unleash growth.

One of two (or more) things is going to happen.  If I and some other supply siders are right, GDP growth along with federal revenues is going to surge.  Obama has set the bar so low that average growth, 3.0 - 3.1% now comes with bragging rights.  Growth in 2018 Q1 and Q2 will be front and center in the analysis of how well Republicans have done coming into the final stretch and Q3 will be the news coming into the election (along with war, terrorism, healthcare, etc.).

This is not Reagan's tax rate cut but he didn't get it all done in the first round either.  His first round tax rate cuts were fully in place on 1/1/83.  Growth rates reported for the first 3 quarters were: 6.31%, 7.58%, 9.66%.  

Remember we just came out of 8 years where they couldn't buy anything above 2% growth even with 4.5 trillion in stimulative quantitative expansion.  Now Trump and the Republicans come in at 4 or 5% growth?  And do it without funny money monetary game-playing of running up the deficit!  The opportunity will exist to change the narrative.

A doubling of the growth rate of the largest economy in the world is a Big F***ing Deal.  Of course the left will head right back to redistributionism arguments, but the table is set to win this argument (again).

Lowering the corporate rate from 35% to 20% should bring in 20/35ths of the revenue.  That is static thinking.  That is first level thinking.  And that is what the conservative review author thinks as his article is laced with static thinking.  But that is not what is going to happen.  Revenues will increase in a growing economy.  Mark my words!  

Assuming this passes and the results look good, the country will still be at a fork in the road.   If we have learned nothing or cannot win this argument, ccp's warning will come true, we will never have another chance to lower the rates.

Liberals will argue income inequality again and use false data and false logic again to do so.  If conservatives are silent or message-challenged as usual, we will lose even though we won.    But the table will be set to do it differently this time.

We tried their way.  We tried a decade of it.  We tried expanding government.  We tried doubling the debt.  We tried getting the 1% to pay for everything.  We tried expanding healthcare and every other federal program down to 'cash for clunkers' and 'shovel-ready' projects that were really just 'kickbacks to kronies'.  We tried redistributionism on steroids, and what happened?  

Everyone they said would benefit did worse.  Inequality widened.  Black teenage unemployment was the worst.  Tens of millions of people went on food stamps, while the main nutritional problem emerging became obesity.  We had an SSI disability 'beneficiary' epidemic that the Surgeon General ignored.  Everyone knew it was just a measure of the new economy where half the country looks for free shit and half the political spectrum looks for more people to give freebies for votes to.

And now, if this passes and succeeds, we will keep a record of their predictions of the doom and gloom of it.  What is Paul Krugman and the rest saying?  It will blow a hole in the deficit, only the top 1% will benefit, etc.  But we will have data and we will see who benefits.  The rising tide will lift all boats (didn't that use to be a Democratic expression?).

When the workforce participation rate improves, that is not the 1% jumping back in to take minimum wage jobs.  When people opt off of food stamps and out of disability contracts that limit their income and demand for these programs eases, that is no the top 1% getting back in the game.  When the black, teenage unemployment rate drops and the inner city murder rate plunges, that is not a giveaway to the rich.

If this passes, if this succeeds, the benefits will reach far and wide in an interconnected economy.  The critics will be proven wrong.  Leftist economic will be shown to be loser-economics.  There will be an opportunity that America can have a teachable moment.  Whether or not anyone will emerge who can articulate that, build on that and go back and cut the rest of the rates that need to be cut, we will see.

[DougMacG]

I concur with ending the state and local tax deduction.

It is the right thing to do.  My advice was to keep (mostly keep) the property tax deduction and they did.  Paying for you local schools is as legitimate a deduction as most charities.

When we ended the deductibility of credit card debt, it was phased out, giving people an opportunity to change their ways in the face of the new law.

The other practical problem with elimination is that they need the vote of blue state Republicans.  There are plenty of people, perhaps 40-49% of the population in these states, who are subject to high tax rates that they did not vote for.  GM has good advice on relocation but I could move to the moon and my income on the disposal of my MN holdings will still be unfairly taxed in MN.  I don't have move to not sell it and to not maximize my income.  People have family and homes and other considerations.

This bill reaches an acceptable compromise on this nearly unresolvable issue.

[ccp]

"If this passes, if this succeeds, the benefits will reach far and wide in an interconnected economy.  The critics will be proven wrong.  Leftist economic will be shown to be loser-economics.  There will be an opportunity that America can have a teachable moment.  Whether or not anyone will emerge who can articulate that, build on that and go back and cut the rest of the rates that need to be cut, we will see."

Maybe Trump could .  Maybe some of the younger generations  will get it.   

Sure won't see Brock, or CNN saying "we were wrong".

[Crafty_Dog]

I asked Scott Grannis to comment on our recent comments.  Here is his response:

=======================================================================

From my blog yesterday:

BEGIN
So what about Trump's tax reform proposal? It looks good, but it could be better. It's very business-friendly (e.g., cutting the corporate tax rate significantly, allowing for immediate expensing, shifting to a territorial system that taxes profits only at their source, and eliminating or limiting many deductions). But it's tainted by keeping a very high rate on top income earners (and a new, even higher rate on those who make more than a million), and by not reducing the tax on capital gains and dividend income. However, these negative effects are somewhat offset by the phaseout of the death tax, the elimination of the alternative minimum tax, and the indexation of tax brackets by future inflation.

Trump's proposal effectively shifts a lot of the corporate tax burden to individuals, which in principle is a good thing, because in theory there should be no tax on businesses. Whatever tax businesses do pay is effectively passed on to consumers, employees, and shareholders—better and more efficient to tax them directly than indirectly. The top rate for individuals is there purely for political purposes; it will do nothing to stimulate investment or the economy because it fails to increase the incentives of the most successful to invest, take risk, and work harder. That's like hobbling those most capable of creating new jobs. It will also mean that those in the middle class who strive to reach upper class status will face a very steep marginal tax rate curve, thus creating new burdens for the middle class. And by creating very different top rates for individuals and corporations, it will result in myriad efforts to arbitrage the difference (e.g., by switching from S corp to C corp status).

It will, however, very likely result in more investment in the US, since it sharply increases the after-tax returns to corporate risk-taking in the US relative to other countries. Lots of capital that has fled high US business tax rates will likely return, with the net result being to increase the ratio of capital to labor in the US. That in turn would have the salutary effect of boosting wage income, because when you add capital to an economy you automatically make labor relatively scarce, and that has the effect of boosting wages. (If you want to invest more in an economy, you need to hire people to run the business.) If this tax proposal passes, we can expect to see more overall growth in the economy, more jobs creation, PLUS higher real incomes for the vast middle class. Unemployment is low, so a significant increase in the demand for labor is almost certain to require higher real wages. Rising real incomes would be a very welcome thing for everyone.

True tax reform requires the elimination of deductions and a lower and flatter tax rate structure. This proposal goes part way on the deduction front and a long way on the corporate tax front. Unfortunately, it makes the individual tax rate structure steeper and more progressive. It's a shame that Republicans couldn't propose something worth doing on all fronts without first caving to potential political opposition. But I won't let the perfect be the enemy of the good. This proposal beats the heck out of doing nothing!
END

What’s missing in many of the "dogbrothers" comments is a focus on how the tax plan changes incentives; that’s all that really matters. For example, doubling the standard deduction increases after tax income for many, but it does nothing to increase the incentive to work more or invest. The only justification is that it offsets the elimination/capping of deductions. You have the correct position on the corporate tax cut, but the best way to understand its effects is to follow the incentives. Reduced corporate taxes invite more investment in the US. More investment means more hiring, higher incomes, more productivity and more prosperity.

[DougMacG]

Scott is right on this in the big picture.

"What’s missing in many of the "dogbrothers" comments is a focus on how the tax plan changes incentives; that’s all that really matters."

I skipped over this important point in my comments, writing just that " it will grow the economy".  The incentives are why it will grow the economy.  All kinds of further reforms are possible if we restore growth and change the stuck on stupid, static economy narrative.

Out in the real world, I am hearing concern (rage) about every individual deduction lost, e.g. alimony, student loan deductions, even if the difference is made up for in new deductions.  Republicans need to get out ahead of this with better messaging or get swept up in the criticism - from all sides.  Rubio writes today in the NYT that the child tax credit increase is too small.

The main alternative to passing this partial reform right now is the status quo, a 75,000 page and growing tax code loaded with flaws, disincentives and unequal treatment of different income from different taxpayers, guaranteeing zero growth at best.  Further, the result of Republicans failing to govern when given the chance is the pendulum swing in the opposite direction with more Democrats elected, more pages to the tax code, higher rates, economic downturn and ever-greater social spending needed to make up for the productive economy losses. 

And China will sail by us economically and militarily if stagnation is our policy choice.

[ccp]

Doug,

They may as well as just cut the corporate rate to 20 % and ditch the rest of it if you ask me.

The rest is switching things all around with in the end minimal tax cuts for some and tax increases for others.