The jury won’t be coming in for a while on President Trump’s tax plan but I can assure you this: Most taxpayers — read that people that rely on paychecks and not stock options — probably want the tax code simplified and tax burdens reduced.
Yes, I know the drill. This could cost the government billions. The rich are getting tax cuts.
Funny, isn’t it? The same people who are howling about how it is a leap of faith to assume reducing tax burdens will stimulate investment and spending and therefore generate taxes and then some to replace what revenues the IRS loses have no problem doing the leap when they push Congress to use the tax code for social engineering.
Oh, I forgot. Those tax credits for green initiatives or to build a NASCAR race track are needed because it serves a desire and a want of the groups advocating them.
Let’s strip all the political rhetoric away and get down to the nitty gritty. What the real objection is that people can’t be trusted to spend their money “the right way” which is of course whatever special interest group is pushing to expand the government or adopt new tax credits believes that to be.
When the16th Amendment cemented the federal government’s authority to tax income in 1913, the first tax form was universal and one page — how much money did you make and the tax you owed. There were no deductions. There were no tax credits. Those were added later to further goals of people who want to use the income tax system for social engineering and the unadulterated transferring of wealth such as done via the earned income tax credit and tax credits that allowed PG&E over a three-year period to earn $4.85 billion and not pay a cent in tax.
I’m sorry, I forgot. PG&E used the $4.85 billion to stimulate the economy. We know this because of all the politicians they lined up in Congress to deliver the tax credits said that was the reason for allowing PG&E not to pay their fair share of taxes and essentially shift the burden to everyone else.
But whenever anyone talks about lowing the tax rate on those that you can identify with Main Street — small businesses, traditional employers, and workers — as opposed to those that view Wall Street as the center of the universe we are told that it won’t stimulate the economy.
Let’s just take one aspect of the Trump tax proposal that hardly is getting any play as pundits, politicians, and the purveyors of rhetoric focus on aspects of the plan designed to do things such as entice firms like Apple — which has more than $178 billion sitting in offshore accounts to avoid draconian federal taxes — to put money to work by investing it that in turn creates jobs and generates taxes: The standard deduction.
By doubling the standard deduction to $12,600 a person making $12 an hour in a 40-hour per week job will effectively be making 45 cents more an hour. The Greek chorus will tell you that is an inconsequential amount. Tell that to those making $12 an hour. Over the course of a year that keeps $945 of their money in their pockets.
Amazing, isn’t it? When Eldon Musk gets tax credits that puts money is his pocket by allowing him to build subsidized electric cars that are then sold to people who make enough money to afford them that are assisted with additional federal tax credits that is considered a good thing. When PG&E’s income tax obligation is wiped clean for three years that is a good thing.
But when someone breaking their back can possibly get $945 more a year to help them keep treading water this is not a good thing.
The establishment — read that the political class and the activists that they cater to — would prefer the government provide relief by social engineering by increasing the earned income tax credit.
They also sneer at the idea of reducing corporate and business taxes that would free up more money to invest that in turn generates jobs and additional tax revenue as saying it takes money from the IRS but they don’t hesitate to pass tax credits as if they are handing out Halloween candy.
Both avenues can reduce a company’s tax burden but the tax credit route essentially forces the private sector to do the beck and call of special interests that get Congress to manipulate the federal tax code in order to get tax breaks.
The frame work of the tax plan can be summed up as simple as this: It trusts that business and the individual taxpayer best know how to spend their money.
Government needs taxes to deliver services. Tax credits don’t deliver services. They select winners and losers in the economy and take money away from delivering government service to conduct social engineering.
There is no wailing when tax credits reduce the federal government’s tax receipts. Instead there are rosy projections about how they will stimulate investment, create more jobs, and generate even more tax revenue.
The Trump tax plan is no different except for one real big thing — it trusts Americans and American businesses to determine the best use of the money involved and not special interests.