On the eve of the Senate Passing the GOP Tax Plan, I find it disturbing that there is no middle of the road discussion of its merits or demerits. While I have not read thoroughly all of its measures, I think I understand the big picture. Of course I deplore when President Trump says his taxes will go down. Alas, Mr. Trump Lincoln said it best: “You cannot fool all the people, all the time.”
The Reduction of the Corporate Income Tax from 35% to 21%. Frankly, I cringe when I hear commenters state, “that almost all of the corporate savings will be allocated to greater dividends and stock buy backs.” Of course this is demagogic. I am willing to bet that not one company will allocate its tax savings just for those measures. It would be suicidal because CEO’s number 1 mission is to take steps to expand the prospect of a robust corporate life. I will go so far and predict that 75% of the corporate savings will go for increasing employment, improving capital plant and equipment, and acquiring other companies. All things being equal, this will lower unemployment further.
We currently have 126 million employed workers. If we can increase this over the next 12 months to 128 million, this means we add 2 million more workers who are earning about $60,000 per year. This would increase the GNP by $120 Billion per annum or $1.2 trillion over a decade. If we add, 20 million workers over the next 10 years, we are talking some $12 trillion. While this is admittedly high, the government assumes economic growth at 2%, while I think 3% annual growth is achievable. In the 1950’s and 1960’s, our economy grew at a faster rate than 3%. Let us not sneeze at the likelihood that all things being equal the tax cut is a positive for our economy. I could argue that in part the U.S. economy over the next ten years will grown by $10 trillion. In that case government revenues will grow by at least $2.0 trillion and maybe $2.5 trillion. Stated differently, opponents of the tax cut are looking at a static economy. Supporters are looking at a dynamic economy. Where do I stand? I believe that by 2118, the U.S. economy will be around $28 trillion and government revenues will exceed $5 trillion, some $2 trillion above current levels!
Opponents of the tax bill say that this might add only $50 dollars per week to $100 per week for the average worker. At $50 per week, this is $2,600 on an annual basis, some 5% increase. While commentators might snicker at a 5% wage increase, the average American will be most happy.
The next issue those naysayers raise is that the rich disproportionately benefit by the reduction from 39% to 37%. Since the top 1% of Americans will pay nearly half the income taxes for 2014 is not it fair to reduce their burden. The bottom 80% pay only 15% of all federal income. To me there should be a honest discussion of what is a fair percentage for the top 1% to pay. Should they pay 100% of all income taxes? Should they pay 50%? In the words of Cain, I am not my brother’s keeper. I find it hypocritical when I see people enjoying a lifestyle far more opulent than me, gush crocodile tears over the plight of the poor. By the way, a poor that they have nothing to do with.
The whining over the burden on the middle class who live in states with high income tax rates is fraudulent. The standard deduction goes from $6500 for the individual to $12,000. It doubles for married couples to $24,000. Since the average family of four makes close to $60,000, by definition much of their tax burden is reduced. Furthermore, up to $10,000 can be further reduced for state income taxes or property taxes. It is impossible for a person earning $60,000 to be hurt. State income taxes (my guess is $2000) and real estate taxes on a $250,000 home cannot be more than $5,000. Thus the total is $7,000. To cut to the chase, the average family will get a tax cut not a tax increase!
Supporters of President Obama, point out that while the economy grew at about 1.7% under his presidency, the stock market rallied more than under Donald Trump. How do I respond? I appreciate the fact that under President Obama we had a growing economy and not a Depression. That said, under Trump our economy has grown much faster-3%. As a person who was “all in by March 2009 (the low of the market), I take my hat off to Obama. However, how can one compare the results over 8 years to the results over 1 year? I would fire a commenter that compared the two—it is beyond stupid!
What is my prediction? Currently, on balance a net 23% of Americans oppose the tax plan. My bet is that in one year a majority of Americans will approve this tax plan. I am willing and fact look forward to betting a lunch on this! Let the best man eat at the other’s expense.
Originally published in the Sarasota Herald-Tribune
