GOP Tax Plan: Hardly “Reform,” But Tax Cuts “Cost” Nothing


by Thomas L. Knapp…….

The Trump administration and congressional Republicans released their grandiosely titled “Unified Framework for Fixing Our Broken Tax Code” on September 27. The plan looks a lot more like a grab bag designed by lobbyists than like any kind of carefully considered plan for “tax reform.”

It’s full of smoke and mirrors. For example, the one-page highlight sheet brags that “the framework roughly doubles the standard deduction so that typical middle-class families will keep more of their paycheck.” I’d hoped that this might be the start of something like an Incremental Tax Exemption program (themite.org). But as I dug into the details, it turned out to be a bait and switch scam: “To simplify the tax rules, the additional standard deduction and personal exemptions for the taxpayer and spouse are consolidated into this larger standard deduction.” The plan takes as much more from you on one side of the equation as it leaves with you on the other.

When critics point out that the plan’s tax cuts are weighted heavily toward the wealthiest Americans, they’re right. It’s full-on “supply side” hokum: Cut the corporate and other business rates and wealth will “trickle down” as entrepreneurs innovate and create jobs.  But “demand side” cuts would actually convey more information to those entrepreneurs, guiding their innovation as they chase the additional dollars left in the pockets of regular consumers. I’m all for tax cuts and not terribly particular about where they fall. But let’s be honest: Cutting the corporate and top rates isn’t about sound economics, it’s about whose lobbyists buy the most expensive lunches for, and who contributes most reliably to the campaigns of, which politicians.

Of course, the main criticism coming from opponents of tax cuts as such is that those cuts would “cost” the US government something. The New York Times claims (drawing on an analysis by the Tax Policy Center) that “the corporate tax cuts will cost nearly $7 trillion over the next two decades …. the entire package is expected to cost an estimated $5.6 trillion over the next 20 years.”

Well, no. The total “cost” of the proposed tax cuts would be a whopping zero dollars and zero cents.

If I’m mugged one night and it turns out I left my wallet at home, that fact doesn’t “cost” the mugger the $20 that was in it. The $20 wasn’t his in the first place. It was mine. If I walk past a restaurant without buying something to eat, it doesn’t “cost” the restaurateur anything. Ditto for money that government doesn’t take from you or me.

Politicians want us to believe that our money naturally belongs to government and that letting us keep any of it is generosity on their part.  But politicians don’t create wealth. They just seize it from the rest of us, or borrow it from lenders who expect them to seize it from us later.

The Republican plan looks like a combination of weak tea, scammy distractions and voodoo economics to me. But I guess we could do (and have done) worse.

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Thomas L. Knapp (Twitter: @thomaslknapp) is director and senior news analyst at the William Lloyd Garrison Center for Libertarian Advocacy Journalism (thegarrisoncenter.org). He lives and works in north central Florida.

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6 thoughts on “GOP Tax Plan: Hardly “Reform,” But Tax Cuts “Cost” Nothing

  1. I don’t know if it’s a good tax plan or not, but it doesn’t seem like companies/manufacturers would be discouraged from coming to America if the tax rate is lowered.

    1. I agree. But the thing is, that’s true whether what’s lowered is the corporate rate, or the top rate, or the low end.

      Made-up numbers here (I’m too lazy to look them up at the moment):

      I cut the corporate tax rate from 35% to 30%. That encourages companies to do business in the US, because they keep a bigger percentage of the money they make.

      I cut the top personal income tax rate from 39.6% to 35%, and all other rates similarly (which lowers the taxes of everyone and takes a few of the poorest off the tax schedule altogether). That encourages companies to do business in the US because there’s more money they can make here. If the average person has $500 more to spend this year than last year, he’s going to spend it on the products made by those companies paying corporate taxes.

      The difference is that the personal income tax cuts create more information concerning economic demand, which creates better outcomes. 500 people with $1,000 to spend will let entrepreneurs what they want to buy with that money. One entrepreneur with $500,000 to launch a new project just has to hope he guesses right when he tries to figure out what people will want.

      1. this “tax cut” is nothing but a scam. sure some middle class slobs may get a little back and they’ll be thrilled to get it. but at the same time, the rich will be getting back exponentially more. but, all the lemmings see is the minuscule relief they receive, so they wont care. and then the real cruncher; the government will start defunding the programs that these same lemmings benefit from, and presto, you are made worse off so the rich can get richer.

        tax cuts are a fraud; you should be demanding redistribution instead.

        1. Actually, it looks like the middle class will end up paying more under the GOP plan. Not especially surprising.

          I have no desire for redistribution. But I do prefer cutting taxes from the bottom up (themite.org) and welfare from the top down.

          1. in the U.S. ceo’s earn more than 300 times the avg. worker; the top 1% own as much wealth as the bottom 90% of americans. and globally, the 1% own as much as the rest of the 99% combined. I would like to think most people would find that hard to defend.

            so, how is few extra bucks going to help the average guy again??

            you say you don’t desire redistribution; and yet you have witnessed the greatest wealth redistribution in history. and you don’t seem to have a problem with it.

          2. On the contrary, I have witnessed the greatest wealth distribution redistribution in history and I definitely have a problem with it.

            Redistribution will ALWAYS be from the poor and to the rich — like Marx said, the state is the executive committee of the ruling class, so who do you THINK they’re going to serve? Therefore I oppose redistribution.

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