President Trump is proposing major tax reforms that will help the economy to create millions more jobs and much more wealth.
The Golden Rule says: Low tax rates historically have encouraged commerce and job creation while high taxes have thwarted economic growth. This is why the American economy has shifted significantly to the low-tax states.
Here’s the Chicago Tribune talking about high-tax Illinois:
“I’m getting out,” said (Illinois resident) Mallin, 67. “It’s not just the property taxes on my home; it’s all of them.” He figures his taxes in Florida, where there is no personal income tax, will be about a quarter of what he’s paying now.
Mallin’s not the only one leaving the state. In 2016, Illinois lost 37,508 people, putting the state’s population at its lowest level in nearly a decade, according to U.S. census data. It was the third consecutive year the state lost more residents than any other state. The state’s population count for 2017 won’t be released until December.
When president Trump talks about “tax cuts for the middle class” he should also explain the bigger issue – that his overall proposal is intended to give the middle class better and more secure jobs and incomes, which are much more important than just tax reductions.
So why do Democrats reflexively oppose lower taxes when it is proven that tax cuts help the economy?
Answer: Because Democrats get power when people are weak. And when the government takes away money through taxes, and destroys jobs, the people are weaker and the government is stronger. This is the Democrat agenda in a nutshell.
Here are some of the issues that president Trump wants to address in his reform plan:
*Simplification: Trump wants a flat-tax system such that all IRS tax forms will be eliminated and you can fill out your taxes in three lines – your income, percentage rate, and tax paid. No deductions; they are built into the system.
This alone is worth the price of admission. The IRS and all of its tax forms are a huge government-imposed burden on Americans. Taxpayers live under a stressful cloud from January 1 until they file their taxes on April 15. It is time to end this.
The Tax Foundation estimates that Americans waste more than $400 billion annually on tax filing including accountants, lawyers, H&R Block etc. and their own time and lost productivity in filling out the forms. If this money and time instead were invested in the economy that would be a huge boost.
*The standard deduction would be increased for married couples from $12K to $24K. This would replace most individual deductions.
*Tax rates would be reduced to three brackets from seven brackets. The rates would be 12% and 28%, and then 39.6% for the top earners. These are rates before deductions.
This 39.6% means that the top rate remains unchanged, that wealthy Americans get no rate reduction under this part of the Trump plan. The reason is simple – the media would savage Trump for “giving himself and his rich friends a tax cut”.
The top rate was 90% in the 1950s, before deductions. In 1980 it was 70%. Today it remains at 39.6%. It fell to 28% under president Ronald Reagan, setting off a 25-year economic boom. It was reduced from 63% to 25% in 1923 under Republican president Calivin Coolidge, setting off the Roaring 20s, one of the biggest economic booms in history.
In the 2005 Trump tax return that was leaked to the media he ended up paying 25% in federal taxes after deductions, which was more than Obama, Mitt Romney, John Kerry, George Bush or most other Americans paid. This came after Democrats claimed that Trump was paying no taxes.
*Alternative Minimum Tax eliminated. AMT was originally a surtax on a small number of wealthy people but it now has spread and ensnared millions of taxpayers. It should be eliminated. It is just another tax that sucks capital out of the private economy.
*The net investment income tax, which adds a 3.8% surtax to interest, dividends, rental and royalty income earned by the wealthiest 2%, would be eliminated.
Forbes reports about the “middle class tax cut”:
… the middle class, on average, will have an extra $1,500 or so to spend each year should the President’s plan, as proposed, come to fruition. Those in the top quintile, however, will have an extra $16,660.
There is a reason for this disparity: An economically successful person pays much more in taxes to start with, but is the one most likely to create new jobs, like a doctor building a vacation home. And a new job that pays $40,000 is more valuable to the middle class than a tax cut of $1,500 for someone with an existing job.
Thus Trump’s plan hopes to give tax relief to the upper-income people and corporations that already are paying the most in taxes, who have the most money, and who are most likely to invest in the private economy either by investing in growth (stocks, investments, starting or expanding their own company, etc.) or by spending it.
Even more importantly many middle class people today pay no federal taxes or very little in federal taxes anyway. Market Watch reported:
Today, most Americans aren’t clamoring for lower taxes, probably because most of us don’t pay very much in federal income taxes. Our tax burden has rarely been lower. The latest data show that the 60% of families in the middle of the income distribution — those between about $32,000 and about $140,000 — pay an average of just 2.5% of their income in federal income taxes.
Look at this, also from Market Watch, if you want to know the crux of the problem for the middle class, which is not the federal tax rate but the overall tax burden that they pay:
Nearly half of Americans owe no federal income tax at all, but they do pay taxes: payroll taxes to fund Social Security and Medicare, tariffs, excise taxes, corporate taxes, property taxes, sales taxes, state and local income taxes, and so on. If they have a problem with taxes, it’s not with the federal income tax.
*Eliminates the deductibility of state and local taxes from federal tax payments. In heavily-taxed states like liberal California this would be a big blow to taxpayers, particularly rich ones. This is a way for Trump to “stick it” to Democrat states with high taxes, where most of the rich people are liberals.
Democrat governor Andrew Cuomo in New York state is going nuts over this one since this tax increase on “rich people” directly impacts his rich Democrat donors.
*Reduces the corporate tax rate from 35% to 20%. This is very important because corporations create jobs. The less that they have to pay in taxes, the more that is left on their balance sheets for investment in new jobs or to pay good salaries or to give raises and benefits.
This 35% is the highest corporate rate in the world. Even socialistic Japan lowered its rate from 35%. High taxes induce companies to avoid expansion or move to lower-tax nations and take their money with them, which already has happened since the US rate went to 35%.
This corporate tax reduction to 20% will keep companies here in the US and induce companies who have trillions of dollars “parked” overseas in lower-tax nations to bring that wealth back to the US. This will help our economy greatly.
Here is Bloomberg.com talking about high-tax France:
France’s wealth tax has driven 10,000 people with about 35 billion euros ($41 billion) in capital abroad in the past 15 years, Prime Minister Edouard Philippe said.
Another point: Corporations don’t pay taxes anyway. Taxes are one of their costs of doing business, and so the cost of taxes is passed on to their customers in the form of higher prices for their products. So high corporate taxes are really paid for by American consumers including the poor, the working classes and the middle class and thus a lower corporate rate is a type of economic relief for all consumers.
*Ends the Estate Tax. This is another good idea. The estate tax declares that wealthy people must give a huge chunk of their life’s savings to the government when they die. Is this fair to people who worked hard for their money? Like a person who spent 40 years working hard and building up a business?
No. How many times have we heard about a hard-working farm family that has to “sell the farm to pay the tax bill”? It is outrageous.
Here are a few other important issues about the Trump plan:
*The media and Democrats say over and over that tax reductions “have to be paid for”.
This is a perennial Democrat talking point that is false. It claimed, for instance, that Ronald Reagan’s 60% reduction in taxes on the wealthiest Americans in the 1980s had to be ‘paid for’ by a 60% reduction in government spending, or that that 60% of lost government income would have to “be paid for” from another source, like higher taxes on the middle class.
Nonsense. Reagan’s 60% reduction produced a 91% increase in revenues to the government from all of the increased economic activity. This also happened in the 1920s and 1960s when top rates were reduced and economic activity skyrocketed, along with revenues to the government.
Again, the Golden Rule says: Lower tax rates, particularly for the highest earners, are good for the economy and for people who want jobs. You would never go into a poor neighborhood looking for a job.
If a rich person buys a new car or adds onto his house or buys an artwork, that money goes to the car salesman, the artist, the carpenter, the electrician, etc. Then the salesman, artist, carpenter or electrician spends that money at the bakery, hardware store, restaurant, etc.
If the government taxes wealth away too aggressively from the rich person then that money gets sucked out of the private economy and gets spent on inefficient government programs that benefit government bureaucrats and poor, dependent people and other non-productive socialist hangers-on.
Ironically artists are some of the most liberal Americans who want “the rich” taxed heavily. Yet it is rich people who buy expensive artworks. If “the rich” are taxed more, they will buy fewer artworks.
*On the other hand, a special federal luxury tax on yachts imposed in 1990 was supposed to bring extra money into the government. It did the opposite. Yacht sales fell dramatically when the tax pushed the price up, not only cutting the amount of revenue to the government from the taxes on yacht sales, but the drop in sales led to thousands of job losses in the yacht-building industry.
*Wealthy people pay most of the federal taxes. The Top 1% of earners pays about 39% of the federal tax burden. The Top 10% pays 70%. Yet liberals say how much they hate the Top 1% or Top 10%
Ironically if you look at a super-wealthy place like the chic ski resort of Aspen, Colorado, a big increase in taxes on “the rich” would harm the Aspen economy because the rich people wouldn’t have as much income to spend on their multi-million dollar condos and houses, and expensive clothes and dinners and ski tickets. Yet most of the people in Aspen are hard-left liberals, including the rich people themselves along with the service workers and businesses that serve the tourist industry (liquor store owner, carpenter, caterer, ski instructor, etc.).
*Tens of millions of poor Americans have paid zero in taxes for decades, and have taken tens of trillions from the taxpayer. These bottomless handouts need to be cut significantly. Many of these people live very well with nice apartments, cars, cell phones, air conditioning, cable TV and free health care. Yet the same Democrats who have set up this insidious Welfare State are the ones who complain loudest about productive, hard-working people getting a tax reduction.
*The tax withholding system from paychecks allows the government to hold your money for more than a year and only return the ‘refund’ part. In other words, you get zero interest on that money when the government has it. This is another huge rip-off and amounts to tens of billions of dollars in interest lost to American workers every year. This withholding system should be ended with a flat tax.
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