Posted on 05/09/2022 9:52:18 AM PDT by Wuli
As Karl Popper demonstrated, evaluating a scientific proposition requires falsifiability—theories or hypotheses can’t be proved or disproved if they can’t be subjected to empirical tests. When the 2017 Tax Cuts and Jobs Act was passed, we were criticized for being overly optimistic about the effects we predicted it would have. Now the evidence is in. Our critics were wrong, and the economic data have met or even exceeded our predictions.
In 2017, we predicted that reducing the federal corporate tax rate to 21% from 35% and introducing full expensing of new-equipment investment would boost productivity-enhancing business investment by 9%. Though growth in business investment had been slowing in the years leading up to 2017, after tax reform it surged. By the end of 2019 it was 9.4% above its pre-2017 trend, exactly in line with the prediction of our models. Looking solely at corporate businesses—those most directly affected by business-tax reform in 2017—real investment was up by as much as 14.2% over the pre-2017 trend, slightly more than we expected. Among S&P 500 companies, total capital expenditures in the two years after tax reform were 20% higher than in the two years prior, when capital expenditures actually declined.
Citing an extensive empirical literature, we also predicted that by enhancing worker bargaining power and increasing new investment in domestic plant and equipment, the average household would see real income gains of $4,000 over three to five years. In 2018 and 2019 real median household income in the U.S. rose by $5,000—a bigger increase in only two years than in the entire eight years of the preceding recovery combined. In 2019 alone, real median household income rose by $4,400, more than in the eight years from 2010 through 2017 combined.
[see the rest at the link]
(Excerpt) Read more at wsj.com ...
Delivered half. It certainly increased the deficit because Congress keeps forgetting about the need for spending reductions to meet your new revenue levels.
“It certainly increased the deficit because Congress keeps forgetting about the need for spending reductions to meet your new revenue levels.”
Better tax methods are not the cause of deficits. The blame goes 100% to the spending side and 100% of that goes to Congress.
No, the tax cuts delivered 100% of the predicted benefits.
Congressional failure to control spending is an important but separate issue.
We must never allow the Left (and the low-information Right) to make cutting tax rates conditional upon first cutting spending - or neither will happen.
We must never allow the Left to blame deficits on tax cuts - deficits are caused by spending too much - not by taxing too little.
We must never allow the Left to ask: “How are we going to pay for these tax cuts?” or to suggest “we can’t AFFORD these tax cuts.” That kind of twisted language implies that any spending level is OK as long as we tax enough to pay for it.
There is a maximum level of government spending beyond which the private economy is destroyed. When we exceed that maximum (as we have) the economic destruction occurs, regardless of whether it is tax-funded or debt-funded.
It is right to cut the tax rates.
It is right to cut spending.
Don’t hold one hostage to the other.
Congressional failure to control spending is an important but separate issue.
It shouldn't be separate issues. Tax cuts are invariably followed by higher deficits because Congress refuses to see the connection between controlling revenue as well as spending. It's fun to cut one, not so much fun to cut the other. The deficit increased every year under Trump.
Reductions in revenue that are not offset by reductions in spending are the fault of Congress and the administration.
“Reductions in revenue that are not offset by reductions in spending are the fault of Congress and the administration.”
Congress controls spending. The executive can only propose but the control of the purse strings resides and it Congress that writes all spending legislation; and if the executive objects they can try to veto but Congress can override a veto when it chooses; which means the “buck stops here” resides with Congress most all the time.
Well, I agree.
Now, will our side get the chance to extend them before the
2024 sunset takes place?
Congress controls revenue as well. So they're the ones responsible for both, right?
The executive can only propose
Trump didn't even do that.
Congress controls revenue as well. So they’re the ones responsible for both, right?
Right.
I agree - it is to much government spending that destroys the economy - whether tax funded or debt funded.
My point is that fiscal conservatives have historically gotten “played” by the Leftist narrative - that too much debt is worse than too much taxation. That is a false premise - it is too much spending - period.
By wrongly conceding that false premise, fiscal conservatives get tricked into raising tax rates (or not lowering them) to close the deficit.
But what that false premise implies, is that excessive government spending is OK, as long as it is balanced - paid for - by higher taxes.
Since either alternative (excessive debt or excessive taxation) put the exact same burden on the private sector economy - it becomes a messaging issue:
Which message should we send to the American people?:
1) We raised taxes to match spending - no more deficit - problem solved!
Or…
2) We refused to raise taxes, and there is a looming national debt problem!
I prefer to have the debt staring voters in the face, rather than fool voters into believing that excessive spending problem has been solved with higher taxes.
As Ronald Reagan used to say, if your teenage kid is getting into serious debt from spending excessively - the answer isn’t increasing his allowance. That may solve the debt problem - but not the excessive spending problem.
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