Why Democrats must go back to school on taxes
S E E D E D C O N T E N T
Try explaining marginal tax cuts to a room of 5th graders.
Once, on Ronald Reagan ’s birthday, I tried to explain what the top rate was like before our 40th president took office. “Imagine doing some chores for your grandparents,” I said, “and your grandma gives you $10. Then, when you get home, your parents take $7 from you. That’s what the tax rates were like before President Reagan took office.
The students immediately said that wasn’t fair.
Even 5th graders get it.
The last time the top tax rate was 70 percent was back in the days when President Jimmy Carter talked about a country in a malaise. Now, socialists like Rep. Alexandria Ocasio-Cortez (AOC) and Sen. Ed Markey want to bring that top tax rate back as part of the so-called “Green New Deal.”
AOC’s response when I tweeted about the fact that even 5th graders realized that wasn’t fair was to suggest that only a limited number of people would pay the tax. It reminded me of when former British Prime Minister Margaret Thatcher said, “the problem with socialism is that you eventually run out of other people’s money” to spend.
Politicians in Maryland helped make that point years ago when they passed a “millionaire tax” presumably to soak the “rich.” Apparently, the targeted taxpayers decided to flee and revenue projections were not met. Eventually, the governor proposed a new tax on households making $100,000 or more.
Think about that: The income of a fire fighter and a nurse could easily exceed $100,000 (particularly on the East Coast). Hardly wealthy. Uncontrolled spending in Maryland eventually hurt the middle class. Sooner or later they ran out of other people’s money to spend.
History is full of examples like that.
Remember the federal budget deal in 1990 that increased taxes on “luxury” items?
So who got hurt by the tax? According to a Wall Street Journal editorial, “Yacht retailers reported a 77 percent drop in sales that year, while boat builders estimated layoffs at 25,000.” All of the fuss about sticking it to the rich really just ended up hurting the thousands of middle-class workers and their families who got pink slips.
The taxes also took in $97 million less than had been projected for the first year. Consumers were buying fewer of the “luxury” items — or at least not buying them in America. In effect, the socialist dream of taking from the wealthy ended up hurting sales, which lead to massive layoffs and revenue projections that missed the mark.
Conversely, tax reductions have consistently had a positive impact on the economy.
Tax rates were cut several times during President Reagan ’s tenure and America enjoyed many years of economic recovery. Plus, revenues continued to go up.
Revenues also continued to grow under the tax cuts proposed by President John F. Kennedy in the 1960s and during and around the Coolidge era in the 1920s. Liberals and many in the media (sometimes hard to discern which is which) mistakenly believe that lower taxes produce a reduction in revenues. History suggests otherwise.
But taxes are about more than just fiscal and economic policy. They are really about freedom.
Take Sen. Elizabeth Warren’s Wealth Tax, for example. It’s not enough to just raise taxes on income, now they want to tax your savings, too.
To me, that is like telling a straight “A” student that she must share her grades with the other students. Rightly so, she would say this is not fair.
Instead of stealing from her, why not help each of the other students do better?
As President Reagan said, “the weakness in this country for too many years has been our insistence of carving an ever-increasing number of slices from a shrinking economic pie. Our policies have concentrated on rationing scarcity rather than creating plenty.”
Instead of fighting over who gets the last piece of shrinking economic pie, let’s help the people of our country produce a bigger pie so that everyone will have a chance to live a better life. That is a uniquely American idea.
We are blessed to live in the land of equal opportunity, but the outcome is still up to each of us. True freedom and prosperity do not come from the clumsy hand of the government. They come from people being able to control their own life and their own destiny through the dignity that is born of work.
As policy makers consider tax increases or tax cuts, I hope they will remember these simple facts. Lest they forget we celebrate the 4th of July and not April 15th, because, in America, we celebrate our independence from the government and not our dependence on it.
• Scott Walker was the 45th governor of Wisconsin. You can contact him at [email protected] or follow him @ScottWalker.
The Washington Times https://m.washingtontimes.com/news/2019/mar/21/why-democrats-must-go-back-to-school-on-taxes/#gallery_1
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“As President Reagan said, “the weakness in this country for too many years has been our insistence of carving an ever-increasing number of slices from a shrinking economic pie. Our policies have concentrated on rationing scarcity rather than creating plenty.”
Instead of fighting over who gets the last piece of shrinking economic pie, let’s help the people of our country produce a bigger pie so that everyone will have a chance to live a better life. That is a uniquely American idea.
We are blessed to live in the land of equal opportunity, but the outcome is still up to each of us. True freedom and prosperity do not come from the clumsy hand of the government. They come from people being able to control their own life and their own destiny through the dignity that is born of work.
As policy makers consider tax increases or tax cuts, I hope they will remember these simple facts. Lest they forget we celebrate the 4th of July and not April 15th, because, in America, we celebrate our independence from the government and not our dependence on it.”
Locked until the seed url is corrected
The url is repaired.
The gop's irresponsible tax cuts for the wealthy gave us trillion dollar deficits, again.
When the next recession hits there will be nothing left fiscally to do that can fix it...
We will not even be able to increase spending or cut taxes to stimulate the economy.
Reaganomics and trickle down still does nothing but make the rich richer and the poor poorer.
Actually far more who left the middle class moved up to a more wealthy group than those moving to a less prosperous category. Now working class and middle class workers are getting pay increases we deserve.
Funny how the Reagan tax cuts that took us from a top marginal rate of 70% down to 25% and then finally settled at 28% caused Federal Revenue to double by the time Reagan left office. Right now, our top tax rate is 40.8%, which is drop of less than 3% from the PPACA top tax rate of 43.4%
is the link for the following revenue chart:
Actually total federal government revenues went up after the tax cuts. It’s on Congress to make sure spending doesn’t go up even faster. These recent tax cuts were very beneficial to 85% of all Americans. Only the rich in areas of ridiculous high real estate prices and high state and local taxes did not benefit much at all or lost money.
The gop increased spending and cut tax revenues thus doubling deficits...
Federal deficit spending is up 77% in 1st quarter '19 compared with '18...
Your purpose is to mislead. Deficits will exceed a trillion dollars this year.
Are you disagreeing by agreeing with Keep America Great!? Keep America Great! and I both said we didn't have a revenue problem and the real problem is spending. You first claim that the GOP cut revenues while increasing spending and Keep America Great! pointed out that revenues have increased. Now, you are claiming Keep America Great! is misleading people while complaining about deficits which is government spending more than the revenues are coming in, essentially agreeing that spending is the problem. Are you disagreeing or are you agreeing? If you are disagreeing, why are you agreeing with us while claiming to disagree?
Deficits go up because spending is going up even faster than revenues are going up. Trumps proposed FY 20 budget does have some serious cuts proposed in it.
We will be able to cut interest rates and to cut taxes to fight the next recession. Spending levels were never cut back from the baseline Obama and the democrats placed in during the FY 09 budget they created in March of 09 after the final CR expired. We’ve never stopped the spending stimulus, thus the massive debt the last decade.
The GOP stuck it to the country. American's were looking for, and promised there would be, tax REFORM. Gone would be the days of corporations paying zero dollars in taxes, they'd be paying their "fair share". In exchange they'd get lower rates (who knew in perpetuity). Our trough, for 10 years.
Trickle down alright...pretty certain I know where the faucet is and trust me that's not water washing over our fields of grain.
Why then did democrats vote in the house against a bill to make the present rates permanent for everyone?
Since permanency to the average American was part and parcel of the overall bill, I'm quite certain the Dems no vote isn't even lost on you.
Reform, we were sold reform!
I’m just glad that the nationwide cap on real estate mortgage interest deductions at 750k and the national cap on state and local taxes at 10k are permanent. Those changes affecting the rich made the rest of the tax cuts some 30% less costly according to the static model of tax cut “costs”
so, my cut in tax rate from 15% to 12% is permanent now?
Actually it isn’t. The change in the standard declduction amount and per child tax credit and eliminating of other credits are permanent but the lower rates at each income level are not permanent and democrats opposed an effort to make it permanent. Obama made the Bush tax cuts permanent except the top rate. We expect that as they near expiration that pressure from the public to make them permanent will mount as people will then be used to them and have budgeted accordingly and won’t be able to afford a tax increase then. If they are not then renewed the resulting tax hikes on the working and middle class will be all on the democrats.
The seed link is broken; here is a working link to Scott Walker's predigested pablum: Why Democrats must go back to school on taxes
The idea that tax cuts increases Federal Revenue is a lie built upon a lie. Notice that Walker (like other neo-liberals) have been forced to draw on bizarre examples, like luxury yachts, to cite harm done by tax increases. Why can't neo-liberals show the harm done to real manufacturing, like toasters or washing machines? Frankly working Americans don't care about the luxury yacht business; working Americans are more interested in the real economy rather than the bizarre economy.
So, how could Reagan cut taxes on the wealthy and honestly expect Federal tax revenue to increase? That charlatans trick is not difficult to explain. The size of the US labor force was increasing, labor participation rates were going up, and Reagan increased FICA taxes.
The size of the US labor force increased from 106 million in 1980 to 126 million in 1990 ( Civilian Labor Force - FRED ). The labor participation rate increased from 64 pct in 1980 to 67 pct in 1990 ( Civilian Labor Force Participation Rate - FRED ). The number of working Americans paying taxes (particularly FICA taxes) increased by 16 pct between 1980 and 1990.
While it's true that income taxes are the largest Federal revenue stream, it is also important to recognize that income taxes provide less than half of Federal Revenue. ( Current US Federal Government Tax Revenue ) So, even if the wealthy pay half of Federal income taxes that only provides 1/4 th of Federal revenue. American workers pay more overall taxes than do the wealthy. Deliberately ignoring the revenue stream from FICA taxes is a charlatan's trick.
More workers, more jobs, and higher wages increase Federal revenue. That's what the real data shows. The neo-liberal hokum-smokum of the 1980s won't work today because the United States isn't seeing a large increase in the number workers, number of jobs, or higher wages. The United States has lost a lot of manufacturing capacity since 1980. Capitalism died a quiet death after 1980. The United States has lost its ability to produce, manufacture, and compete.
The neo-liberal charlatans are reduced to trying to lie their way out of the mess by convincing American workers they should be worried about luxury yachts.
So we had the ability to compete prior to 1980 with near 20% inflation, almost 20% interest rates, and climbing unemployment?
The cure for high inflation is high interest rates. Fractional lending prints money (causing inflation) and devalues the currency.
High inflation was cured but it took raising rates and the resulting high unemployment, higher even than the 2008-9 recession to do it. The misery index of inflation interest rates and unemployment was greater in 1982 than in 2009. The tax cuts got us out of the 1979-1982 mess.
The reason why labor force increased and work participation increased was because of the tax cuts which stimulated the growth in the economy to make it happen. More workers paying at a lower rate generated more income than fewer workers paying a higher rate.
The reason the labor force increased is because the children of the 1950s and 1960s became adults. Unless there is something that show tax rates affect birth rates then the argument is really nonsense.
Lowering inflation by increasing interest rates might have helped a little, too.
children of the prior generation are always becoming adults. That there were enough jobs for the 2nd half of the baby boom those born 1955-1964 makes the recovery all the stronger. I was part of that, being a college Republican and then joining the labor force during his time in office. Even when I left college my government student loans were at 9% and I fully paid them off in five years.
I can’t believe that you are arguing that the luxury tax didn’t cause more harm than good and actually lost the government revenue. Do you care nothing about the workers making those items and the jobs they lost when people bought less of or none of the items affected by that tax? People bought items just under the cutoff price or put off buying said items or bought them overseas. Putting high tax rates on the taxes most easily avoided is silly and catastrophic on the workers making those items who lose all of their income when they don’t have their job making that stuff anymore.
I can't believe neo-liberals think working Americans are concerned about luxury yachts.
I’m not concerned about the boats per se or whoever buys them. I was concerned about the craftsmen and others employed some unionized who made them and whose jobs and families depended on their being built and rich people buying them.
Trump with his energy independence effort and cheap natural gas has made it efficient to rebuild manufacturing here in America again along with his regulatory roll back of recent excesses and tariff increases and or the threat of them to rework the bad effects of several key trade deals. Insourcing of manufacturing from companies that had outsourced along with foreign companies investing in factories and other capital investments here is creating a surge in manufacturing jobs and we are now finally seeing real increases in wages.
No tax cuts? Interesting ...
They were part of it, cutting the corporate rate from 35% to 21%.
And then the corporate and small business tax cuts were crucial to our current strong economy. American companies doing business abroad kept almost all of the revenues gained abroad from that business over there after paying the taxes over there. They saved it or reinvested it over there rather than bringing it back home to face our then 35% rate. Now that the way we tax overseas profits of domestic companies has changed and the rate cut from 35% to 21% , the amount being brought back to America to be reinvested here or to do R&D here, and for wages and bonuses here has increased by a factor of 6-10 depending on the time frame. 21% of 6 is much more revenue for the government than 35% of 1 is.
So, why aren't we seeing a surge in manufacturing IPOs? Why is Wall Street still going gaga over service businesses?
9 Major Upcoming IPOs to Watch in 2019
service businesses play a huge role in our economy and employment. It is a lot easier for a person or small group of them to create a service business from scratch than a manufacturing one from the ground up. The fact remains that manufacturing jobs are coming back and they pay employees higher than many service jobs do. Wages are going up too. It seems that Trump found the magic wand that Obama derisively described to Heartland America’s then displaced workers he told would never get their jobs back.
So, is this article unlocked now? I also posted the seed because I wanted to discuss the issue. Since this one is open now, I'll delete mine.
Yes, I fixed the url and found a moderator present to unlock it.
https://youtu.be/6ecH4KYtxYA
Trump will promote a middle class tax cut this year. It will be interesting to see the House response to it.