The tax bill is about to be passed by Congress this week. As of now, it seems that every Republican senator is on board to vote for the bill, and there is a clear majority in the House as well. People will be getting a major tax cut starting in 2018. Nevertheless, despite this bill going forward, the lies being told about the bill seem to have affected the view of a great many Americans. Here's some examples:
1. According to a new poll, a majority of people do not expect their taxes to go down after the bill is passed. They've listened, no doubt, to the lie from the Democrats that the bill takes money from the poor and middle class to give to the wealthy. Actually, the bill gives the biggest tax cuts on a percentage basis to the middle class. Estimates are that something like 80% of all taxpayers will see a cut. Of the remaining 20%, about two-thirds will see no change. About 6% of taxpayers will see tax increases, and the bulk of those will have incomes above $200,000. Given the facts, it's crazy that so many people bought the lie that the bill will raise their taxes.
2. The same poll shows that a large majority of Americans don't believe that the tax cuts will stimulate economic growth. This too is wrong. American businesses are going to get a major tax cut. Think of a company, let's say a small domestic food company that now pays 35% federal taxes. When those taxes get cut to 21%, that's a big increase in earnings and cash for that company. That will have a number of effects. First of all, the company's stock should rise because its earnings after tax will go up by about 20%. That means that everyone who has invested in that stock will reap the reward. The 401Ks and pensions of millions of people invested in stock like this will rise in value. It will create wealth for a great many Americans and that will mean more spending and more economic activity. Second, the company will have to decide what to do with the extra cash. If it just pays it out in dividends, then many people will have higher incomes and will spend more, meaning more economic growth. If the company just buys back stock, then again, more people will have higher incomes and will spend more, meaning more economic growth. A big chunk of the cash, however, is likely to be used to expand the business. These investments in plant and equipment mean many new jobs and more economic growth. In fact, aside from the company just putting the cash in its checking account and letting it sit there unused, there is really no use to which the cash could be put which would not mean higher economic growth. The media and the Democrats, however, have told America the lie that the tax cut won't help economic growth. They deride it as "trickle down" economics. Actually, it's the same phenomenon that led to the greatest period of economic growth in US history from 1983 forward after the Reagan tax cuts.
3. Will the tax cuts lead to a big jump in the national debt? The bulk of Americans think so, according to recent polling. The correct answer, however, is that this is the best chance to stop the growth of the debt. Indeed, the cut in taxes and the resulting economic growth is the best chance we have to increase revenues in a sustained way. Think of it this way. If the cuts lead to a 1% of additional growth per year over the next decade, that would mean about 2 trillion dollars of additional GDP in the tenth year. That extra GDP means two things: 1) about $400 billion in additional tax revenues, and 2) much lower expenses by the federal government as all sorts of programs like food stamps, welfare, Medicaid and the like have fewer people who need them. It's prosperity that results in cutting the debt, not taxing us all into poverty (which is the Democrats' solution). In the last 40 years, the only time the USA had budget surpluses was in the mid 1990s when the full effects of the Reagan tax cuts had the effects I listed above.
I suppose that once the tax bill goes into effect, there will be a great many people who will be pleasantly surprised by the law's effect on their own taxes. Growth will take a bit longer to fully kick in. The GOP had better get the message out or the lies by the Democrats and the media will still be there.
1. According to a new poll, a majority of people do not expect their taxes to go down after the bill is passed. They've listened, no doubt, to the lie from the Democrats that the bill takes money from the poor and middle class to give to the wealthy. Actually, the bill gives the biggest tax cuts on a percentage basis to the middle class. Estimates are that something like 80% of all taxpayers will see a cut. Of the remaining 20%, about two-thirds will see no change. About 6% of taxpayers will see tax increases, and the bulk of those will have incomes above $200,000. Given the facts, it's crazy that so many people bought the lie that the bill will raise their taxes.
2. The same poll shows that a large majority of Americans don't believe that the tax cuts will stimulate economic growth. This too is wrong. American businesses are going to get a major tax cut. Think of a company, let's say a small domestic food company that now pays 35% federal taxes. When those taxes get cut to 21%, that's a big increase in earnings and cash for that company. That will have a number of effects. First of all, the company's stock should rise because its earnings after tax will go up by about 20%. That means that everyone who has invested in that stock will reap the reward. The 401Ks and pensions of millions of people invested in stock like this will rise in value. It will create wealth for a great many Americans and that will mean more spending and more economic activity. Second, the company will have to decide what to do with the extra cash. If it just pays it out in dividends, then many people will have higher incomes and will spend more, meaning more economic growth. If the company just buys back stock, then again, more people will have higher incomes and will spend more, meaning more economic growth. A big chunk of the cash, however, is likely to be used to expand the business. These investments in plant and equipment mean many new jobs and more economic growth. In fact, aside from the company just putting the cash in its checking account and letting it sit there unused, there is really no use to which the cash could be put which would not mean higher economic growth. The media and the Democrats, however, have told America the lie that the tax cut won't help economic growth. They deride it as "trickle down" economics. Actually, it's the same phenomenon that led to the greatest period of economic growth in US history from 1983 forward after the Reagan tax cuts.
3. Will the tax cuts lead to a big jump in the national debt? The bulk of Americans think so, according to recent polling. The correct answer, however, is that this is the best chance to stop the growth of the debt. Indeed, the cut in taxes and the resulting economic growth is the best chance we have to increase revenues in a sustained way. Think of it this way. If the cuts lead to a 1% of additional growth per year over the next decade, that would mean about 2 trillion dollars of additional GDP in the tenth year. That extra GDP means two things: 1) about $400 billion in additional tax revenues, and 2) much lower expenses by the federal government as all sorts of programs like food stamps, welfare, Medicaid and the like have fewer people who need them. It's prosperity that results in cutting the debt, not taxing us all into poverty (which is the Democrats' solution). In the last 40 years, the only time the USA had budget surpluses was in the mid 1990s when the full effects of the Reagan tax cuts had the effects I listed above.
I suppose that once the tax bill goes into effect, there will be a great many people who will be pleasantly surprised by the law's effect on their own taxes. Growth will take a bit longer to fully kick in. The GOP had better get the message out or the lies by the Democrats and the media will still be there.
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