Why Cut Taxes Right Now?

Everyone hates taxes, right?  I know I certainly do.  You may not think so based on the title of this post, but I get it.  As every American probably knows, the big move right now is to reform taxes.  The President wants to cut taxes.  The Republican House and Senate seem to be moving forward.  I guess I’m just not sure: Why cut taxes?  At least right now.

Does Anything Get Fixed With The New Proposals?

My biggest concern with what I’m reading is that things don’t seem to get fixed.  When I look at taxes, the problem I have is how arbitrary things are.  You have, as an example, a $3,000 limit if you lose money on stocks.  That’s the most you can write off in a year.  This is completely arbitrary.

Take the alternative minimum tax.  That’s been in place for decades. They always do a year by year change to exempt most people from it.  Does the new plan get rid of it or fix it for good?

The rich currently benefit from the thousands of deductions and credits more so than any other group.  It does stand to reason that if you make more money, you have more opportunities here.  Still,  ‘simplifying the tax code’ was a rallying cry for President Trump.  Is it going to get any simpler?

Business taxes are going to be cut under the new proposal.  This is supposedly to attract or keep businesses in America.  The thing is, I haven’t heard a single business say that this would make a difference?  Will it?  Or will businesses simply pocket the money?

At the same time, businesses paying less are supposed to expand.  In theory, taxes go down meaning there’s more money.  More money should fuel growth.  Will this work?

The tax cuts are supposed to increase household income.  But does this rely on businesses paying more from their tax savings?  I’m not sure businesses will do that.  More often than not, shareholders, not employees are rewarded.

These are just a few examples off the top of my head.  And while I may have missed some details, I’ve not seen these things addressed.  Are we really ‘fixing’ anything so much as ‘changing a bunch of stuff’?  And is that a good idea?

Does A Tax Cut Make Political Sense?

I’m kind of confused why Republicans are standing behind this.  Polls show that most citizens have doubts about this.  They seem to be pretty knowledgeable that the middle and lower class are not the primary beneficiaries.  Yes, the ‘trickle down’ effect is supposed to help them, but there’s a lot of skepticism.  With good reason, I would think.

So, I wonder why Republicans are standing behind this.  People would love a tax cut.  I’m just not sure the majority of voters will love this tax cut.  If this passes, and people aren’t happy about it, they’ll take it out on politicians next November.  After Republicans lost several key elections last month, this has to be worrisome.

But, it could be that they’re screwed either way.  After all, to be the Republican that says no to a tax cut, even a flawed one, could be used against them.

The Economy Is Bad, Right?

No, of course not.

Usually tax cuts happen when the economy needs a boost.  Tax cuts happen to get us out of a recession.  Or when growth is flat.  But, we’ve been in a period of economic growth for practically ten years.  It hasn’t been fabulous growth, but it’s growth nonetheless.

So, what’s the motivation for the tax cut?  And is it a good idea?  After all, if we cut taxes now, what happens during the next eventual recession?  A tax cut now will make it harder to play that card when it might be needed.

My Opinion

As I’ve said above, I would love to pay less taxes.  I’m just not sure this is the way to go.  I’m not in favor of any plan that puts the majority of cuts in the pockets of the rich.  The middle class is losing pensions and pays more for health care.  The lower class has a harder time than ever finding full time jobs.  These are the people that need the help the most.  Promising that the help will get there by first giving the savings to the rich is a bad idea.  The rich show that they will likely use that money to simply get richer.  They’ll invest it. They’ll save it.  What they won’t do is pass it down.  At least, not as their first option.

And I’ve already made it clear my thoughts about the impact to the deficit.

So, the answer for me is a firm no.

Readers, what do you think of the tax cuts?  Are they fair? Should we cut taxes at all?  What changes would you make and what would you keep?

13 thoughts on “Why Cut Taxes Right Now?”

  1. These proposals boil down to hurting the lower and middle classes to give the ultrawealthy yet more money, from what I am seeing, and I don’t see any true simplification or widespread benefits coming from it. In addition, I think we’ve seen that trickle-down doesn’t actually work the way it’s theorized to.
    I’m not in favor of this, in this form.

  2. At the risk of being overly obvious the reason that tax cuts favor the higher earners is that the lowest earning 50% of the population pays nothing or gets free kickbacks. Any system that doesn’t give the biggest reductions to those who are carrying the entire load for everyone else, now that would be pretty unfair.

    • I agree with you to a certain degree. I’ve always felt that government should not necessarily increase handouts (or kickbacks as you called them) but that there is opportunity to funnel money into areas that could help people that receive them improve their standard of life so that they no longer have to receive them? So, what would you think to where the rich didn’t receive as many tax breaks, but that money was instead funneled into improving schools or adding job training programs in low income areas?

      I lean very much Republican, so I understand a lot of the basis for where you’re coming from. However, I also know that if you have $10,000 to give in tax cuts or credits, that $10,000 isn’t going to probably change the lives one bit for a rich family except to pad their bank accounts, whereas funneling them to educational or training credits toward low income households could be of great more benefit…and to more than just one family. It’s the bang for your buck that I’m looking at. I mean if the idea is simply to cut taxes, then let’s just go for the $10,000 cut to the rich family because it’s definitely cutting taxes, but I thought the idea was reform, and I wanted it to go further than just the government collecting less taxes.

  3. Interesting post Money Beagle. I lean very much the opposite way and have the same questions about the tax reform. It seems like a reshuffling of the deck. It would be great if this really were some type of tax simplification but from what I’ve read so far it seems to be that certain people will pay less and certain people will pay more. Good stuff for bloggers to figure out and learn the tricks of the trade, but is it really that good overall? One thing that seems certain is that the Republicans don’t think income inequality is nearly the problem the media portrays. That’s great news because if you listen to the media you would be led to believe that the rising inequality is causing problems in the heartland! I was worried that was the case but now that I see the tax reform is happy to increase that inequality I know that the problem must not be that great or usually the rich will do something to close the gap.

    • I’m not sure I understand this logic. And I don’t mean that to be confrontational–I just legitimately want to understand it. Isn’t economoc inequality and the loss of jobs what the GOP President ran on? It’s real in the cities. It’s real in the heartland. It’s measurable. I’m not saying this because of the media. I’m saying this because I’ve seen it first hand, and I’ve read the numbers released by the Fed over the past couple of decades.

      And while it is bad for everyone, I don’t see the insanely wealthy concerned about it. Like this says, if they were they’d be taking a very different approach to tax reform and the subsequent cuts to social programs which people have paid into. (My own senator, Toomey, has said this is the next step after the bill is finalized.)

      Also, I agree with you on these programs, Money Beagle. We should be directing funds to them–not away. The largest “kickback” for the poor is the EIC, which is a government subsidy on the minimum wage, and is not changing. It rewards those who work. You’re not going to be sitting around doing nothing and get a huge refund–you have to work for it with low compensation for your efforts.

      This bill does hurt the middle class and lower income earners. Because of the EIC, I’m particularly concerned about the former. With the cuts, it will also hurt our elderly, and our disabled–including children.

      Why is this happening? The GOP donors were holding back funds fur 2018 campaigns because the legislative branch had failed to pass anything. So this is their gift in exchange for campaign funding. It’s economically ill advised and will add to inequality rather than helping people who live with real disadvantages climb to the next rung of the ladder add become self-sufficient.

      I’m worried about why they think money will help them win an election after they’ve screwed the vast majority of their constituencies. (Bearing in mind that the median income in this country is around $63k, the votes, should people vote in their own best interest or abstain, should be more powerful than the cash infusion.)

      I don’t hate the wealthy. But I do hate when they rob those with less money than them via the government and are so shortsighted in their pursuit of even more excessive wealth. I hope we live in a world where these two things are not mutually dependant on each other.

      • Thanks for the detailed comment and great thoughts.

        I think that the unfortunate part about today’s political system is that the candidates with the biggest war chests tend to have an edge, especially if they are incumbents. So, if what you brought up is correct (and I have no reason to think it isn’t), then I would guess that the thinking is that they’ll get money from the donors and win the elections next year, regardless of whether people like it or not.

        It’ll be interesting to see if that really does hold, though. I know that there’s typically backlash during mid-year elections, especially if the sitting president and the majority in Congress are from the same party. I remember very well when the Democrats were basically swept out in 1994 as a referendum on Clinton, who people were very unhappy with at the time. I could see the same thing happening with the Republicans and Trump. I guess that if that did happen, the rich might not have their candidates in office any more, but they’d still have their tax cut, so either way they’d come out ahead.

        And isn’t that the way it usually works with the rich? They win even if they lose….

        • Ugh I know you’re right about the funding, but I really hope we as a people are stronger than that. I hope we have the bravery to vote in the people’s interest rather than partisanship.

          On that note, I want to thank you for looking at this rationally and objectively. I lean left, but have split my ticket more than once in the past when it made sense. It’s difficult to see so many people rejecting truths because it goes against what they want to believe about their leaders. It really restores my faith in humanity to see posts like this, from people who tend to lean the opposite way I do. Bad math and poor policies are bad math and poor policies no matter which side of the aisle we sit on. That’s been true in the past–I just can’t remember one in my lifetime that’s been so blatantly cut and dry.

  4. Hello Money Beagle

    The tax bill does have its problems, I really worry about any tax reduction without a corresponding reduction in government spending. Even fairly conservatitive and libertarian think tanks like the Peter G. Peterson Foundation agree the bill is fiscally irresponsible.

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