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Sunday, October 8, 2017

The Goal Is Growth For All, Not Benefits For Some

I'm getting tired of reading articles about who "wins" and who "loses" if tax reform passes.  There's a whole slew of them again today.  The reality, however, is that most are written by people who just don't understand the point of the whole tax reform effort.  The goal of tax reform is to inject additional money into investment in the private sector economy and additional consumer spending so as to increase the rate of economic growth.  For example, if the change to taxation of off shore profits held by American corporations can bring $750 billion back to the USA, that number is equivalent to more than 4% of the entire economic output of the country for a year.  If only half of the those funds are used for business investments in the USA, that alone would increase economic growth by a minimum of 2%.  So only partial success with just one segment of the tax plan would mean a major boost to growth across America.

There's no exact correlation between job growth and economic growth.  We do know that additional economic growth will mean a great many more new jobs.  We also know that the additional growth will normally mean higher incomes for those who are already employed.  Even the government will get more taxes from all this extra economic activity.  So without predicting exact numbers, we can be sure that higher economic growth will help those who already have good jobs, those who want better jobs, and those who are still seeking employment.  It's a big win for all Americans. 

The pundits, however, don't look at tax reform as a way to help everyone.  They only see who will get the benefits of the tax cuts.  These pundits and think tanks busily announce the winners and losers even before knowing the details of the final tax plan.  They buy into the standard Democrat playbook where one group or another is always a victim; they just can't accept the idea of a policy that is good for the country as a whole.  It's really a sad thing to see these people try to set one group against another in the negotiations about the tax bill.

On top of this, we have the Democrats who have announced that they will only support a revenue-neutral tax plan.  Of course, a revenue neutral plan will not provide additional cash for investment into the private sector or for purchases by consumers.  It would be a tax plan that would not promote economic growth.  The Democrats know this.  They want the tax plan to fail in its principal purpose.  As a result, we have the liberal think tanks that have announced the big deficit which will ensue from the current tax proposal even though 1) it is impossible to know the result without the final plan, and 2) no consideration is given to the effect of economic growth resulting from the plan.

It's important to consider, at least this once, what the benefit for the country will be from the tax reform plan.  Ultimately, that will help everyone.  We can all be "winners".

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