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Friday, April 28, 2017

Proof Of The Need For Tax Reform

The flash GDP number for the first quarter of 2017 was released this morning; it showed growth of 0.7%.  That's terrible.  Of course, it may change as more data is compiled and the government revises the figures.  Still, even were it to rise to 2.0%, it would still be anemic growth.  In many ways, it is president Obama's parting "gift" to the nation.  We had eight years of slow growth under Obama so another quarter where he was president for the first month is no surprise.  What is clear from this report, however, is that something has to be done to jump start economic growth.  America cannot continue down the Obama path of slow or no growth; if incomes are to rise, jobs created and futures to be promising, growth is essential.  Even our national power is at stake.  A stalled economy can only support so much in the way of defense.

Put all this together and you get a very strong argument for the tax cuts that President Trump is pushing.  Indeed, growing the economy is the point of the tax cutting exercise.  The left focuses on the idiotic notion that Trump is just trying to make the rich richer; the New York Times front page today talks of Trump trying to "transfer" trillions of dollars to the rich.  Even for the uber-leftist Times, this is silly.  The tax cuts will help everyone, especially those who are just starting out in life.  A new entrant in the job market needs for there to be jobs which are only created by growth.  Someone who has been working for four years needs to have available positions above his or her pay grade if promotion is to take place; those positions too are only created by growth.  People building houses can only sell them if there are more buyers, and those buyers need jobs which need growth.  People making cars can only sell those cars if there are sufficient new buyers; that's growth too.  Look, the point is that cutting the corporate tax from the world's highest to one of the lowest will countless new businesses to our shores.  Cutting the taxation on money held overseas if it is returned to the USA should give the economy a shot in the arm of something like a trillion dollars.  That means growth and lots of it.  The Times sniff that much of that money will go out in dividends to (pardon the expression) the rich.  Somehow they Times doesn't understand that even the money that goes to the rich will be either spent or invested and both of those activities will help spur the economy.  I guess the editors and reporters at the Times think that wealthy people stuff cash under their mattresses.

The individual tax cuts and modifications will also spur the economy.  The average taxpayer who now claims the standard deduction will get a major boost in take home pay because of the doubling of that deduction.  That means more spending which means more growth.

The end of the Alternative Minimum Tax will also mean that many will get a boost in after tax income.  The AMT was originally passed to hit a few dozen very wealthy people who paid no tax.  Over time, inflation raised incomes to the point where the AMT was hitting many millions of people who were not rich.  These people in the upper half of the middle income will no longer get hit with that extra tax.  Instead, the Trump plan does away with most deductions so everyone will pay tax at the state rates with most loopholes being gone.  There will still be a few loopholes for the unscrupulous to use.  While charity will still be deductible, we will no doubt see quasi-charities like the Clinton Foundation used to avoid taxes without actually doing much that is charitable.  Those activities, however, can be policed by the IRS.  That's about it for loopholes in the personal income tax.

No matter what happens in the details, however, the need for tax cuts is clear.

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