Posted on 08/05/2024 2:25:50 AM PDT by karpov
Does anybody in politics understand tax policy these days? The Biden-Harris Democrats want to raise tax rates to Thomas Piketty French socialist levels. Republicans want to cut taxes, but they want to do so for specific groups to buy their votes. They’ve all lost the growth plot.
Mr. Trump’s tax fumbling is especially disappointing because his 2017 cut in tax rates was the policy foundation for the strong pre-pandemic U.S. economy. But so far in this campaign he’s proposing hugely expensive tax cuts for different voting groups that won’t do much for growth.
We’ve written about his promise not to tax tipped income. Then last week he averred on Truth Social that “SENIORS SHOULD NOT PAY TAX ON SOCIAL SECURITY!” He needs to win the senior vote against Kamala Harris by a large margin, so he’s going right for their pocket book. We favor lower taxes as a matter of principle, but not all tax cuts have equal benefit. And this one is likely to backfire in spectacular fiscal and economic ways.
Social Security benefits weren’t taxed until 1983 when the Greenspan Commission recommended the idea to shore up the program’s dwindling finances. Congress moved to require beneficiaries with more than $25,000 in income to pay tax on up to 50% of their benefits. Ten years later Congress did it again by taxing an additional 35% of Social Security benefits for seniors with income above $34,000.
Taxing benefits is expected to raise $94 billion this year for the Treasury. But here’s a fiscal twist. Social Security benefits are indexed for inflation each year, but the income thresholds for taxing benefits aren’t. This means that taxing benefits will raise much more revenue over time as inflation boosts Social Security payments and retirement distributions.
(Excerpt) Read more at wsj.com ...
I’ll comment on the Smoot-Hawley Tariff in a separate post. In this post I’ll deal with how much a tariff would have to generate.
During the time that the country primarily relied on a tariff, federal government expenditures ranged from 1 to 2 percent of GDP (1790 to 1860), rising to 2 to 3 percent (1870 to 1910), during times of peace. See Figure 2 of:
https://www.cato.org/blog/federal-spending-debt-1790-2050
Nowadays, the budget excluding Social Security and Medicare is about 10 percent of GDP.
Interest expense, which has increased by 1 percent of GDP in recent years, is alone about 2.5 percent of GDP.
https://fred.stlouisfed.org/series/FYOIGDA188S
I consider it a major concession to reality that you stopped claiming that the tariff could finance the entire budget, and that we’d need the SS and Medicare tax in addition to the tariff. So, we (meaning you) are making progress.
For most Americans, the SS and Medicare tax is more significant than the income tax. This tax is regressive, hitting taxpayers at $1 of income. Alternate tax codes, including the Flat Tax, the FairTax and Cruz’ tax proposal bring relief to middle class taxpayers by shifting to a consumption tax of one or another kind, with a big zero bracket.
You, finally!, acknowledge that we cannot go back to relying on the tariff (supplemented by excise taxes on liquor, tobacco and perhaps marijuana).
But, you are still seriously short of the money needed by the federal government.
Since you have had several opportunities to get real, what you are suggesting is to defund everything except SS, Medicare and interest on the debt. No more dept. of defense, homeland security, dept. of agriculture, dept of transportation, etc., etc.
Nobody who is serious would make such a proposal. But, you seem to be enjoying yourself. So, good for you.
As for myself, I’m not convinced we can or will get ourselves out of the mess we’re in. We may be past the point of no return, and it’s possible it doesn’t matter if Trump is elected in November. (Nevertheless, we should make the effort to turn things around.)
So, I kind of envy you living in a fantasy where all we have to do is raise the tariff and everything will be good.
“..but they want to do so for specific groups to buy their votes...”
Yeah peckerhead, for the people who actually pay taxes!
“Congress moved to require beneficiaries with more than $25,000 in income to pay tax on up to 50% of their benefits.”
Brillint! Gov’t gives you 5 then on April 15th takes back 2. Only filthy Union government scum could dream up such doucheness.
There are subtleties and nuances to trade policy, but we economists are fond of poking fun of Herbert Hoover and his signing of the Smoot-Hawley Tariff.
Maybe you’ve seen this clip from Ferris Bueller’s Day Off. Most of my students are like the kid half asleep who dribbles on himself when I lecture on tariffs.
https://www.youtube.com/watch?v=uhiCFdWeQfA&t=1s
To put some meat on the bone, look at the chart marked “U.S. Imports 1910 - 1940,” about 3/4 down the page.
You will see that the Smoot-Hawley had its intended effect of greatly reducing imports in 1930. Imports fell from $400 million to $100 million. Saved a lot of jobs, didn’t the Smoot-Hawley Tariff?
https://www.exponentialimprovement.com/cms/smoot.shtml
Now look at the chart immediately above, “U.S. Exports 1910 to 1930.” The Smoot-Hawley Tariff had the unintended consequence of collapsing exports by the same amount it increased imports. Roughly, it destroyed as many jobs as it saved.
This is exactly what we economists said would happen. In fact, we had a list of predictions, and we were right on every one.
As to the point that exports and imports were small relative to the economy back in those days, this is a valid point. So what if a lot of farmers and rural banks went bankrupt. So what if there was a dust bowl in Oklahoma and other states. Other factors, such as the collapse of the banks, were more important in causing the Great Depression.
Just because the government did just about everything it could to make the depression worse, doesn’t mean the Smoot-Hawley Tariff was the worst thing the government did. In a sense, I agree with you: the Smoot-Hawley Tariff wasn’t the worst thing the government did to turn what might have been a recession into the Great Depression.
the old don’t answer the question response
You can be reasoned with. It is like you have some kind of mental defect.
Whenever anyone mentions tax cuts as “hugely expense” you know they love big government. America’s biggest problem IS big government. Money left in the private sector is always better for the economy than it being sent to the “king of inefficiency”. Our national government needs to shrink, and by a lot.
I hope you’re feeling better now.
Countries with a greater amount of economic freedom have higher standards of living and higher quality of life.
In accordance with this, as our country drifts into socialism, things fall increasingly apart. The standard of living of the middle class is lower today than it was in 1999. During the 1990s, the leading politicians on the left said “the era of big government is over.” Not any more. The leading politicians on the left are neo-Marxist, green socialists.
For a time, the other side was muted because the Berlin Wall fell when the communist countries collapsed. But, as that demonstration of the superiority of economic freedom fades into the past, people are again attracted to the allure of big government.
Communists lie about everything. Why? Because they know the facts are against them. Communists even deny that objective reality exists. They claim that males and females are indistinguishable; and, that 2 + 2 doesn’t have to equal 4.
Philosophically, there are two great traditions: (1) Aristotle and the tradition of basing science on observation; and (2) Plato and the tradition of denying what is observed and relying instead on one’s imagination. The first lives in the real world. The second in a fantasy world (which they call the world of ideas).
Yup. Funny how the language itself is perverted by the Left. They tell us that tax cuts are “hugely expensive,” as you point out, but the spending they favor is always an “investment” even it no one can calculate a rate of return.
Who is complaining that we might get a small tax break on our SS benefits? The same liars, cheats, and thieves who are giving it all away to foreigners.
but they want to do so for specific groups to buy their votes
“Cough Cough - FORGIVE STUDENT DEBT!”
++++
“the old don’t answer the question response”
Ah! A response that proves my earlier point.
You have good day!
God bless nationalsm.
God bless Trump.
YOU CAN BE A GLOBALIST or a PATRIOT but you cannot be both.
You have now had two opportunities to answer the question why do you think calling people fools is effective?
Since you won’t or can’t answer that question, I’ll offer my thinking on calling people fools:
Of course, I follow Jesus on this: he who calls his brother a fool is guilty of murder. We see this with Trump. The Democrats who say he’s a danger to democracy have blood on their hands. They induced a troubled man to try to assassinate Trump. You might not like everything Trump has to say, but, if his programs don’t work out, there’s the next election. You can vote him or his party out at the next election. I suspect that the reason the Democrats name-call reveals that they’re afraid Trump’s policies will work out.
The perennial best-selling book How to win friends and influence people, by Dale Carnegie, has the tried and true formula for success. Now, admittedly, Dale Carnegie was a Christian minister, so you’d suspect that he would be following Jesus. But, more so, Carnegie gives positive ways to be effective. Ways that have worked well for managers, salesmen, and others. If you’re interested, here are the crib notes to his book.
I don’t presume you are actually interested in influencing anybody. Possibly you’re just interested in puffing yourself up. If it’s the latter, you must be having a good time, and good luck with it.
If the choice is patriot OR globalist, I served in the U.S. Army, as did my son. So that makes me a patriot.
How about you, did you serve in the military? And, did you raise a son who served? If not, that makes you the globalist.
Look, with your constant recourse to name-calling, I am coming to the conclusion that you aren’t running on all cylinders. If you can, could you say anything to demonstrate that you’re capable of critical thinking?
OK...Your gilded view is yours, alone.
I didn’t call ANYONE a fool. I used an idiom. You choose to overlook that simple point. I’m not surprised.
You certainly present as being quite full of yourself, so all the puffery falls on you.
I am a Trump supporter; have been since 2015. I still support him. Not surprisingly, you missed that, too.
My support of the FairTax over other offered replacements for the current mess of Taxes and Tax Law in the US remains intact, too, despite your posting.
Now, please go back to your lecture hall. You have nothing left to offer, here.
I’m happy to have played a role in disabusing you of your idea that a tariff could fund the entire federal government. It is to your credit that you learned this. Many people are incapable of learning anything.
A certain defense of one’s views is natural and even good. A person should balance their prior beliefs with new information, and neither reject new information out of hand, nor uncritically accept new information.
I suspect that we both would like to see the federal government returned to its original Constitutional limits with spending at a level that could be financed with a tariff and selected excise taxes. Such a tariff would have to be a moderate tariff, it couldn’t be very high or else it would cut off imports and not raise any revenue. It was genius of the Founders to limit the federal government ability to tax, because the taxes it allowed had to be moderate given the reality of the Laffer Curve.
I note that the income tax was only adopted when Wilson cut the tariff rate below the level set by the Republicans back in 1861 (i.e., the Morrill tariff), and when the tax on liquor was destroyed by the adoption of prohibition.
You have disabused me of nothing...
I NEVER voiced support of tariffs as a replacement for the current Income Tax model.
You have your threads mixed up, I fear.
Good day.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.
