Skip to comments.I'd Vote for It - You Should, Too
Posted on 12/04/2017 10:23:26 PM PST by Oshkalaboomboom
Warts and all, if I were a voting member of Congress, I would certainly cast a yea for the tax-cut plans passed by the Senate and House that are headed for conference (to work out minor differences) in the weeks ahead.
These bills are not perfect, especially on the individual side. But the business tax cuts will generate an investment boom in the years ahead. And those cuts will bring economic growth back to its historical norm of three to four percent.
Incredibly, the Joint Committee on Taxation, or JTC, scored growth for the Senate plan at less than one percent. So much for its "dynamic" model. The Tax Foundation estimates three to five percent growth over the next ten years. That's more like it, but it's still too low.
Look, the central cause of the two percent real-GDP growth slump over the past 17 years has been a lack of capital formation with virtually no real business investment, flattened productivity and barely any increase in real workforce wages.
Yet the tax plans under discussion -- which go back to the work of economist Steve Moore, Treasury Secretary Steven Mnuchin, White House senior adviser Stephen Miller, economist Art Laffer, Forbes Media Chairman and Editor-in-Chief Steve Forbes and myself -- are remarkably similar to the Trump campaign draft on the business side.
So I can say with confidence that the current tax package is directly aimed at reducing the current high tax cost of capital and increasing after-tax returns from investment.
Incentives matter. If it pays more after tax to build new capital stock and generate more business-equipment investment, people will do so. This is standard economics.
There may be disagreements on the numerical effects, but the principle has worked in the past (with Presidents Kennedy and Reagan) and will work in the future.
A 20-percent corporate tax rate, immediate full expensing, repatriation of U.S. corporate cash overseas and a 23-percent discount for subchapter S corporation pass-throughs (much credit to Sen. Ron Johnson for this) will generate way more growth and investment than mainstream forecasters suggest.
At various times, President Trump has talked about three percent, four percent, and even five percent growth. Despite the dreary mainstream models, I believe the president will turn out to be correct.
What's more, faster economic growth will generate much higher tax revenues. From businesses to investors to entrepreneurial startups, less tax avoidance and sheltering will raise revenues far beyond the standard consensus estimate.
Supply-siders like myself always buck the trend on pricing out lower tax rates. But again, we were right in the '60s, '80s, and '90s running against the tide. So I suggest history will repeat itself.
By the way, in terms of the revenue hunt going on in Congress, I wish somebody would look at the lowball estimates compiled by the JTC with respect to repatriation. It estimates $25 billion in 2018, $21 billion in 2019, and $6 billion to $7 billion in the three years following. This is nuts.
Assuming about $3 trillion coming back home at an average tax rate of ten percent, that's $300 billion in new revenues -- way beyond the JTC estimate. And that's conservative. It could be $350 billion in the first year or two, which would be substantially more revenue and a way bigger pay-for than what the JTC predicts.
And there's more on the dynamic side. Booming stock market gains of roughly $6 trillion as of late could generate another $600 or $700 billion in revenues from capital gains, as well as hundreds of billions of dollars more in dividends, which generate massive revenue increases.
None of this is scored. The government forecasters don't understand international flows and the interactions of stocks, capital gains, and dividends. Their estimates are probably several trillion revenue dollars short.
Sure, there are things on the individual side that should be changed. Personal tax rates should be much lower. A backdoor capital-gains tax hike on individual investors must be erased. And the proliferation of tax credits is inefficient and complex with no marginal incentives to promote growth.
Yes, everybody likes kids. But not everyone has them. And a lot of people like dogs and cats. Shouldn't they get tax credits, too? No. If you're looking for more money in your pocket, more take-home pay, the best prescription is to slash personal tax rates for everyone.
(By the way, why didn't Congress end the carried-interest loophole for private-equity firms?)
But here's the crux of the matter: An investment boom generating much faster growth will benefit everyone. Small businesses, new businesses, investors and wage earners will all prosper from a tax-cut-led investment boom.
Yes, a rising tide will lift all boats. The great news is that President Trump, the Senate and the House are absolutely moving in the right direction -- and gathering momentum on the way.
I'd vote for it. You should, too.
I don’t know where the proof of the ‘repatriation of cash’ is coming from.
Seems to me some of the people mentioned were selling out to foreign interests.
Where do we see the evidence of a repatriation of US cash?
I like that Larry Kudlow has faith in this bill.
I am not a tax or money management pro. the way he is.
I thought he was going to be a part of the Trump Team in the White House, but maybe he’s just waiting to see how the first two years shake out for Pres. Trump.
...Where do we see the evidence of a repatriation of US cash?
Where? In the future......IF the tax legislation passes.
I like the business tax cuts, but the key point is repealing the Obamacare mandate. That single point will tell us whether this Congress is on our side or part of the Swamp.
It doesn’t matter how successful it is, the old media/rat party crime families will manufacture talking points.
If Larry Kudlow is for it, it cant be good.
Many middle class people will see their taxes go up and this bill gives the Democrats their talking points that this is a tax cut for the tich and corporations.
I was hoping Larry would’ve run for the Senate (from CT), but he didn’t :(
just cutting taxes on corporations will lower prices for consumers. Americans will be able to start saving again.
It’s a good bill. Capital moving back to the USA will be used to upgrade and build new manufacturing plants, and employ people in good jobs. Lowering the corporate rate will entice businesses to invest more capital into the same things. New products, innovation once again. Made In The USA!!!
It will lead to huge GDP gains. Remember when it was going at 5%+? I do. It’s a wonderful experience.
“Sure, there are things on the individual side that should be changed. Personal tax rates should be much lower.”
Why can they not find a way to accomplish this too? No one should see a tax increase, no one. I don’t care if they are upper middle class and have quite a bit of money (I’m not one of them).
Many parts of the bill are great for business. But those corporate profits may only reach their stockholder’s pocket and not lower prices or increase wages. We need a really good tax cut on all personal rates for the citizens of this country.
I hope a bill goes to the President’s desk soon. But I hope also they remember the little people who work and struggle day by day, because the little people will be voting next election.
I will have to sell my home if the rulers cut the mortgage interest tax relief. Floating their oligarchical boat?
We would get better legislation if not for the festering presence of a few strategically elected (I’m sure of this) “Republicans” in congress.
“... the old media/rat party crime families will manufacture talking points.”
True, but don’t make the error of leaving the wheedling RINOcrats outta that toxic cabal. They don’t like us any more than Sanders, Clinton, Biden, Pelosi or any other DEMONIcrat you care to name, and they’ll have their long knives between our shoulder blades given any opportunity.
You can rest assured that McCain et. al. are quietly seething under their breath that the advent of President Trump has put a political gun to their heads that forces them to pass this bill.
Buy stock in Rolaids; RINO heartburn is guaranteed until at least the fall of 2020.
I got lotsa respect for Larry Kudlow. Yeah, the rich aren’t getting cut as much as they should be. But, hasn’t it always been that way?
To me, the other things mentioned by Larry are much more important.
I get that, but I worry more about the 99% than the 1%. I worry about the party that put a Marxist Muslim in power and fostered the entry of 100s of terrorist cells into the country, the party that stole our healthcare, the party that lives on welfare supporters, the party that tore down our sovereignty. In war, you focus on the head of the snake and all but the tip off the tail.
RINOs are a far greater percentage than 1%; it’s more like 20% or higher. THAT is why their too-constant alignment with the Dems is such a crippling problem.
Ask yourself how many voted for Trumps tax cuts and how many voted to hijack our healthcare? The answers are ALL and ZERO. NOW, how many support amnesty? There is some difference.
Oh, quite true; even the dimmest-witted RINOs of them all knew they’d be tarred, feathered, and rode out of town on a rail if they didn’t support the tax cut bill.
they mistakenly believe we’re not equally serious about illegal immigration. THAT worm will turn, and you’ll — I think — see the majority of them knuckle under in favor of still being in office after the next election cycle.
Trump’s got the bully pulpit and — boy HOWDY — is he using it to advantage. Swamp monsters never seen the like. Bet they’re all wishing they could have Reagan back, about now.
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