President Trump unveiled his plans for tax cuts and tax reform yesterday at an event in Indianapolis, Indiana, and most pundits declared them dead on arrival. Meanwhile, several recent polls suggest that many Americans don’t want Congress to pass tax cuts at this time.
For example, a recent poll cited in Investor’s Business Daily found that 42% of respondents said we shouldn’t be cutting taxes right now. But here’s another stat you may not know: 44% of tax filers don’t pay any federal income taxes at all, and some even get tax refunds, according to the bipartisan Tax Policy Center.
It’s no surprise these people don’t want tax reform – they might have to pay something!
IRS data, meanwhile, show that the bottom half of taxpayers accounted for just 2.75% of all federal income taxes paid in 2014, although they earned more than 11% of total adjusted gross income.
But it gets worse.
In a recent NBC News/Wall Street Journal poll, 62% of respondents said taxes on the rich should go up, and 55% said taxes on corporations should go up. Do these people not realize that the top 1% of taxpayers pay almost 40% of federal income taxes? Do they not know that the top 20% of taxpayers account for 83% of income taxes paid?
Do they not know our corporate income tax rate is already the highest in the industrialized world – at almost 40% if we include state and local taxes? Do they not know that other countries have been lowering their corporate income tax burdens to help grow their economies and improve global competitiveness?
Meanwhile, the same survey found that 55% of respondents said their tax burden is “about the right amount” (zero in many cases), while only 40% said they pay “more than their fair share.”
What’s missing from this and other surveys about tax cuts is any context about who pays taxes in this country and who doesn’t. The fact is that the federal tax code is already massively skewed against the rich, leaving half the country paying little or nothing in federal income taxes. When so many pay so little, is it a surprise that just 20% of voters think tax reform should be a priority of Congress, according to Politico?
This is the problem with a highly progressive tax code. It pits those who pay little or nothing against those who pay most of the taxes. Thus, when any tax cuts are proposed, they are immediately demonized as “tax cuts for the rich” because they’re the ones paying the vast bulk of income taxes.
Three Tax Cut Lies Democrats Keep Telling
With the help of the liberal media, Democrats are once again pushing old tax arguments that simply are not true. Here are three of the most popular lies:
Bush tax cuts didn’t work. They argue that the Bush era tax cuts were mainly for the rich and corporations and did little for the US economy, jobs or the middle class. They also claim that Bush’s tax cuts boosted the deficit.
Yet federal budget deficits steadily declined after Bush signed the 2003 tax law, which retroactively cut income tax rates. The deficits dropped from $470 billion in 2004 to $167 billion by 2007.
The economy perked up, with GDP jumping 6.9% (annual rate) in the 3Q of 2003 and 4.8% in the 4Q. In the six quarters after Bush signed those tax cuts, average quarterly GPD growth topped 4%, compared with 2.1% in the previous six quarters. By the end of 2007, the unemployment rate had dropped to 4.7% — down from 6.1% when Bush signed the 2003 tax cuts into law.
So the Bush tax cuts did indeed boost the economy.
The rich don’t pay their fair share. “The last thing we need is for the tax code to be even more rigged in favor of millionaires, billionaires and corporate insiders,” claims the organizers of Not One Penny, a liberal coalition that includes the George Soros-backed MoveOn.org.
If by “rigged” liberals mean a tax code under which the top 1% pay almost 40% of federal income taxes (up from 33% in 2001), the top 20% pay 83% of all income taxes and the corporate tax rate is the highest in the industrialized world, then I guess I would agree.
But the idea that the “rich don’t pay their fair share” is utterly false.
Tax reform must be ‘revenue neutral’. “At a bare minimum, tax reform should not lose revenues,” declares the liberal Center on Budget and Policy Priorities. What they and other Democrats mean by this is that any tax cuts must be offset by tax hikes somewhere else, and they do not account for the added GDP growth as a result of the tax cuts.
The idea that tax reform must be revenue neutral is based on a myth that taxes are at an acceptable level today. The fact is, taxes are historically high. As it stands, taxes as share of GDP will be 18% this year, which is well above the 17.2% average since World War II.
The reason the government is running annual deficits is because spending will equal 21% of GDP this year, which is also well above the post-War average. The country has a spending problem, and taxes are too high. Thus, both taxes and spending should be cut. And, since tax cuts will boost economic growth, much of the revenue “lost” to tax cuts will be regained from additional taxes collected due to the stronger economy.
Yet we don’t hear about this potentially huge benefit from the Dems and the mainstream media. Instead they continue to perpetuate the lies noted above.