Trump Loses the Tax Cut Plot

Wall Street Journal ^ | August 4, 2024 | WSJ Editorial Board

[ridesthemiles]

INVADERS ARE GETTING ALOT OF BENEFITS OUT OF THOSE SS FUNDS.

[pghbjugop]

You do know there is no SS trust fund, ala Ted Kennedy. There is no “Fund” or budget or account for SS. All taxes go into the same pot. Income, excise, payroll, etc. Even when they supposedly “balanced” the budget in the 90’s, we were still in a 300 billion deficit less SS cash flows, meaning the gummint took in $300 billion more in SS taxes than it paid out in SS. For the first 50 years of SS, More SS taxes were paid in than were paid out. About 10-15 years ago(IDR). SS outlays began exceeding SS taxes income. So any which way you look at it, there is not and never has been any sort of “budget” or “fund” or whatever term they use to imply some sense of responsibility with our tax dollars. There is no fund of any sort and therefore nothing to “Trust” in. Every extra dollar of SS income taxes that exceeded the SS outgo was consumed in the federal budget since SS inception. A part of the $100 trillion unfunded liabilities is the SS $ that was consumed in the federal budget since SS’s inception.

[pghbjugop]

You do know there is no SS trust fund, ala Ted Kennedy. There is no “Fund” or budget or account for SS. All taxes go into the same pot. Income, excise, payroll, etc. Even when they supposedly “balanced” the budget in the 90’s, we were still in a 300 billion deficit less SS cash flows, meaning the gummint took in $300 billion more in SS taxes than it paid out in SS. For the first 50 years of SS, More SS taxes were paid in than were paid out. About 10-15 years ago(IDR). SS outlays began exceeding SS taxes income. So any which way you look at it, there is not and never has been any sort of “budget” or “fund” or whatever term they use to imply some sense of responsibility with our tax dollars. There is no fund of any sort and therefore nothing to “Trust” in. Every extra dollar of SS income taxes that exceeded the SS outgo was consumed in the federal budget since SS inception. A part of the $100 trillion unfunded liabilities is the SS $ that was consumed in the federal budget since SS’s inception.

[lewislynn]

WSJ AKA Murdoch/Fox/Dominion collaboration.

[Redmen4ever]

Sorry, I didn’t see your comment until just now.

I wouldn’t say the FairTax “works.” I would say it “is promising.”

My main misgiving with the FairTax is that it would either have a rate that is too high (if applied to goods typically subject to sales tax) or would require that the extension of the VAT to services not typically subject to sales tax (such as the implicit rent in owner-occupied housing).

https://en.wikipedia.org/wiki/FairTax

I similarly liked the Flat Tax when that was proposed by academics Hall and Rabushka. A lot of good things in that proposal, but also some practical problems.

https://en.wikipedia.org/wiki/Hall%E2%80%93Rabushka_flat_tax

Trump’s tax cut during his first administration was a step forward, and I think we can take further incremental steps to transition to a new tax code like the FairTax at a rate (or set of rates) that is (or are) reasonable.

My original post was that while Trump has dribbled out specific tax cuts, such as no tax on tips, these things could be incorporated into a whole that makes sense for which I gave the example of Ted Cruz’ tax proposal. Cruz’ tax proposal includes a VAT of 16 percent (which is in line with most other VATs in the world), and a federal income tax of 10 percent on income above a very high level. Effectively, Cruz’ proposal exempts tip-workers and people who depend on Social Security benefits because of its very high zero bracket.

https://www.taxpolicycenter.org/publications/analysis-ted-cruzs-tax-plan

Of course, all of this discussion becomes academic if we lose this fall.

[BroJoeK]

I-ambush: referring to JonPreston #3: "The author is juxtaposing a concrete proposal, eliminating one or more categories of taxation, with a nebulous, and ultimately unobtainable, goal of “eliminating corruption.”
Ideas that might have been uttered during a McCain or Romney campaign.
If Trump were to follow his advice, he would go down in flames like they did."

In all fairness, JonPreston's call for "eliminating corruption" is analogous to Trump's 2016 campaign slogan to "drain the swamp" and Trump crowds' frequent chants to "lock her up" regarding "corrupt Hillary".
Today we don't hear so much of that talk anymore and I suspect one reason is, everybody understands that the swamp fights back ferociously, and will murder Trump in a moment, if they think that's necessary.

So clearly, Washington DC is long, long past due for a major housecleaning, and I'm 100% certain Trump will do that, though we may not hear so much about it until after the firings are completed.

None of which has anything to do with tax cuts, which I'll repeat, are almost always a good thing, whether for "the rich" or "the poor", tax cuts stimulate the economy and so return increased revenues -- at least up to a point.

Of course, Democrats hate tax-cuts and endlessly construct charts and graphs to "prove" that tax-cuts somehow "hurt the poor".
It's all nonsense, but our class-warriors love it.
Regardless of their charts, Trump's 2017 tax cuts reduced unemployment to 3% overall, record low unemployment among minorities and increased average wages while keeping inflation at record lows, plus increased Federal revenues.

Meanwhile, Democrats can only howl endlessly about "tax cuts for the rich".

Trump's Tax Cuts and Jobs Act (TCJA) of 2017 -- major tax cuts -- will expire in January, 2025, and so this election is literally about Democrat's support for abolishing Trump's tax cuts, versus Trump's intentions to at least continue, if not increase his tax cuts.
If eliminating taxes on tips and social security can generate enough votes to elect majority Republicans, then that is a total win-win-win IMHO.

[PubliusMM]

Well...the FairTax is certainly not a VAT, so the rest of your argument falls short, I’m afraid.

[Redmen4ever]

One of the beautiful things about the FairTax is its mystic quality. Although I gave a link to it, because I mentioned VAT along with it, whatever I said is to be dismissed. FairTax, like VAT and like the Flat Tax (given its exemption of investment), is a consumption tax. This is all I intended to say. I like the idea of shifting tax from income to consumption.

The FairTax is distinctive for two reasons: (1) it is a point-of-sales sales tax. As proposed, the point-of-sales sales tax would be 30 percent of the purchase price, or 23 percent of the total price. No point-of-sales sales tax in the world is anywhere near as high. There are questions of tax evasion with such a high tax rate. On the other hand, many countries have VATs with rates similar to that in the Cruz plan. Compliance is high with a VAT since businesses deduct the VAT paid by their suppliers from their tax liability and, so, there’s a lot of cross-checking. A VAT is doable because it’s done. It’s not a mystical thing. It’s a real thing.

Then, to make the FairTax fair, there is the second distinctive feature: (2) Every family would receive a check from the government each month, equal to what an average family pays through the tax. For sure, compliance with this part of the plan would be 100 percent. It’s like paycheck protection. To quote Dire Straits, “Money for nothing.” I don’t think putting everybody on welfare is a good way to balance the budget.

Besides, we already have a money give-away program called the refundable Earned Income Tax Credit. Instead of freeing people from dependency, the EITC tends to trap people into a set of income security programs including Medicaid and Food Stamps, and often also including housing subsidies, heating and air conditioning assistance, child care and Pell Grants.

We need to strengthen the incentives of people to work and save, which both eliminating the tax on tips and eliminating the tax on Social Security benefits would do. Our challenge is to do this (strengthen the incentives to work and save) while still generating an enormous revenue. Our current tax code is amazingly complex (resulting in high administrative costs as well as high marginal tax rates) and, so, radical proposals such as the VAT, the FairTax and the Flat Tax are attractive. While attractive (because they shift taxation from income to consumption), there are concerns as to whether radical proposals would work in practice.

[PubliusMM]

“...it is a point-of-sales sales tax.” ONLY on first final-use sale.
VAT models tax each and every step of the production, distribution and sale process. OTOH, FairTax models aggregate that value add to the first final-use sale.
FairTax also brings the current dark economy more into the mix...even drug dealers buy toilet paper, household goods, etc.
Dumping the IRS would be a huge cost saving for us, too.
VATs do nothing to relieve that current bloat of FedGov. VATs do very little to alleviate the significant costs of compliance. And, carry the same opportunities for Congressional ‘tweaking’ as the current model.
I remain a strong proponent of the FairTax model. It’s the right way to fund government.
Of course, the bigger notion is this: Tax Reform without Spending Reform is a fool’s game.

[Redmen4ever]

Where did you learn that calling people fools is a way to persuade them to your point of view?

[Gaffer]

So WSJ’s whole bitching is seniors get cut a break on SS taxes. What if the tax cuts are for those making up to a certain amount (like SS retirees) but aren’t retirees. Lower income start out workers, for instance. Lower income blue collar workers, service workers, and so on.

IT’s a damned sight better than forgiving a bunch of kids with $100K in student loans for a counseling or liberal studies degree.

Besides, WSJ, if you get your way we can have all these new illegals now pay into SS to beef it up, right?

[PubliusMM]

And, where did you avoid learing idiomatic English?
Fool’s Game: An endeavor or activity that is a futile waste of one’s time, energy, or resources.

[central_va]

WSJ, the hypocrites that they are, would never be in favor of an import tariff and replacing some if not most of the income tax revenue with an import tariff.

[central_va]

Repeat after me: ALL.TAX.CUTS.ARE.GOOD.

Repeat 100 times a day.

[central_va]

Tax cuts INCREASE revenue.

[central_va]

The VAT is EVIL!!!!!

[cgbg]

“the Social Security trust fund”

Lol.

Meet the “social security trust fund”:

https://moneymorning.com/2017/03/31/the-social-security-trust-fund-is-just-a-stack-of-ious-in-a-west-virginia-filing-cabinet/

[Mr. Jeeves]

Trump’s plot isn’t the Chamber of Commerce’s plot. That all this article means.

[central_va]

A tariff deigned to raise 20 percent of GDP wouldn't raise any revenue.

Payroll taxes would continue to cover SS and MC. The tariff income would only have to cover discretionary spending. So redo your math....

[central_va]

Smoot-Hawley Tariff.

Others have sought to exonerate Smoot and Hawley, arguing that they were not responsible for the economic disasters of the early 1930s. “That the legend of Smoot Hawley endures and continues to influence the trade policy debate is a tribute to the public relations skills of partisans and ideologues with an agenda,” writes Al fred Eckes (1995, 139), a former chairman of the U.S. International Trade Commission. Those partisans and ideologues “successfully transformed a molehill into a mountain.” Conservative commentator Pat Buchanan (1998, 247, 250) contends that “not one of the charges against Smoot-Hawley stands up” and the higher tariff “had an imperceptible effect even on trade, let alone on a national economy of which foreign trade was but a tiny fraction.”