OPINION — The best way to boost wages is to grow the economy. The best way to grow the economy is to cut taxes.
Those truths have been proven time and again by Presidents Coolidge, Kennedy, Reagan and Clinton.
To stimulate the economy, Kennedy proposed major tax cuts, declaring, “A rising tide lifts all boats.” To many Democrats’ chagrin, he also said:
“The paradoxical truth is that taxes are too high today and tax revenues are too low and the soundest way to raise the revenues in the long run is to cut the rates now.”
In his recent book, “Prisoners of Hope,” Randall Woods called the Kennedy tax cut an economic “stroke of genius” that made Lyndon Johnson’s Great Society possible. Gross national product and disposable personal income both rose dramatically, while the number of families in poverty and people out of work dropped.
Facing the same problem, Obama chose instead to raise 13 taxes. Guess what happened? The conservative New York Post notes he’s the first president since Herbert Hoover who did not have a single year of 3 percent growth.
The left has plenty of folks ready to excuse Obama’s poor performance, claiming our economy is no longer capable of growing faster than 2 percent per year. The liberal Committee for a Responsible Federal Budget says that subpar growth of 1.8 percent is “a reasonable assumption.”
They sound a lot like the liberal New York Times in 1982. It reported that despite Reagan’s tax cuts, “professional economists have lowered their projections for economic growth to 1.5 to 2 percent.” Real GDP growth was 4.6 percent in 1983, 7.3 percent in 1984 and 4.2 percent in 1985.
In 1997, liberal economist Paul Krugman argued that “the United States cannot look forward to growth at a rate of much more than 2 percent over the next few years.” His article appeared just before President Clinton signed the Taxpayer Relief Act of 1997 which lowered capital gains taxes, called a “tax cut for the rich.” The economy averaged 4 percent growth for the next four years.
Can we do it again? Should we give tax cuts a try or should we accept Obama’s low growth as the new normal?
Republicans in Congress and the administration have history on their side. I’ll make an argument for two of their proposed changes: lowering corporate taxes and eliminating the estate tax.
Jobs and wage growth depend on worker productivity, plain and simple. In turn, productivity depends on installing new equipment and tools that allow workers to do more in less time. Computers and automated machine tools are examples.
America’s corporate tax rate today is 35 percent, second highest in the world when state and local taxes are included. And unlike most countries, we tax foreign profits a second time when they’re repatriated. CNBC reports that U.S. companies are “hoarding” $2.5 trillion in cash overseas to avoid U.S. corporate taxes.
Three features of the Republican plan will stimulate domestic business investment: lowering the corporate tax rate to 20 percent, immediate 100 percent write off of business investment and dramatically reducing taxes on overseas earnings repatriated to this country.
The combination will make corporate investment in American plants, equipment and workers much more attractive. Corporate earnings and stock prices will get a boost while workers will share in the gains.
Depending on whom you believe, between 20 percent and 75 percent of corporate taxes are reflected in lower wages. With a corporate tax cut, wages will rise.
As corporate profits and stock prices rise, underfunded, at-risk retirement plans at private companies and at state and local governments will benefit. Individual 401(k) accounts and IRAs will grow.
Republicans also want to eliminate the estate tax. Liberals see it as a tax cut for the rich.
In 2001, Nobel Prize-winning economist Milton Friedman wrote an open letter opposing the estate tax. That letter now bears the signatures of 723 prominent economists, including four other Nobel Prize winners. The letter points out the tax’s unfortunate incentives:
“Spend your money on riotous living – no tax; leave your money to your children – the tax collector gets paid first. That is the message sent by the estate tax. It is a bad message and the estate tax is a bad tax.”
Economists argue that taxing estates punishes saving and reduces the capital available to grow the economy long term.
As in the past, these Republican tax cuts are portrayed as tax cuts for the rich despite their widespread benefits for most Americans.
Yet despite what we hear from the likes of Bernie Sanders, the rich are already paying more than their fair share.
U.S. households with the highest 10 percent of incomes pay 45 percent of their income as taxes, highest in the world. Compare that to taxpayers in countries like France, Japan, Sweden or Denmark, all of whom pay less than 28 percent. Surprised?
According to the Organization for Economic Cooperation and Development in Paris, the U.S. “has the most progressive tax system and collects the largest share of taxes from the richest 10 percent of (its) population” in the developed world. Its figures include income, Social Security and Medicare taxes.
Naysayers explained why our economy was stuck in low-growth ruts in 1962, in 1982 and in 1997 and why only the rich benefit from tax cuts. They were wrong every time and they’re wrong now.
Let’s give tax cuts a chance. Make America grow again!
Howard Sierer is an opinion columnist for St. George News. The opinions stated in this article are his own and may not be representative of St. George News.
Email: [email protected]
Twitter: @STGnews
Copyright St. George News, SaintGeorgeUtah.com LLC, 2017, all rights reserved.
Howard, my advice would be to stick with something you are trained in, and leave the economic analysis to people who actually understand the relationship between cause, and effect. We are all entitled to have an opinion, so we will take this article as yours…
All you are doing here is repeating tired cliches, and regurgitating Republican talking points. At some point the debt that the United States has accumulated will need to be paid down. This may not happen in your lifetime, but future generations will be on the hook, and undoubtedly will suffer reductions in federal program spending, and increased taxation for individuals and corporations.
“At some point the debt that the United States has accumulated will need to be paid down.” Your words CE..It won’t be as long as the tax and spend politicians are allowed to spend without conscience. “Quantifying the National Debt. * As of October 2, 2017, the official debt of the United States government is $20.3 trillion ($20,347,802,336,478). This amounts to: $62,418 for each person living in the U.S. $161,723 for each household in the U.S.[3]” Something has to change. “Politicians are like diapers; they need to be changed often and for the same reason”– Mark Twain.. and election day is coming people!!!!!
Ah, I knew who would be here pretending to be an expert in national economics and defend failed liberal policies that have destroyed every major city in the United State. Your socialist (aka, communist) economic theories don’t work, never have, and never will. You , Caveat, your favorite political dirt bags, and the dumb-downed democrat party voter (the ones that don’t know who they are voting for and don’t care as long as you let them sit on their fannies, collect welfare, and break the law) are the final enemies of a responsible human race. Your repetitious tirades on these subjects changes nothing and promotes antics, totalitarianism and every other ugly ism that exists. The last best chance was the United States, but the promised brain-washing from the Marxist has worked well. You are top notch sheep.
Oh Yeah! It worked so well before, NOT! What a stupid idea. It’s never worked before.
true
I know by your credentials you are not a stupid person. I am wondering, with all the preponderance of the evidence, that trickle down economics does not work to help the poor or middle class, yet you still support this. Facts do not support your arguments. Cutting taxes on the wealthy, such as the estate tax, only results in the wealthy getting richer, they just stash it away. They do not hire more workers or invest in new technology unless there is more demand for products and services. That is what drives the economy. If the poor and middle class have more money to spend, they will spend it, and drive the economy upward. Tax breaks for the rich does not, and never has, driven the economy. Tax breaks on the poor and middle class could help, but the tax breaks being proposed would only line the wallets of the wealthiest Americans who really do not need it and would have no effect on stimulating the economy. Honestly, I do not know where you line of thinking comes from given the facts.
Completely true. I don’t know how anyone can trust any economic policy that the republicans propose. It was only 9 short years ago they collapsed the country’s banking system, requiring massive gov’t intervention just to stave off total economic collapse, most of this the result of the massive housing bubble collapse that the Bush II regime let get way out of control. The fundamentals of republican economic policy have basically not changed AT ALL since 2008 when the collapse happened on their watch–it’s all about deregulation and tax cuts for the super-wealthy, squeezing every ounce of productivity out of workers while paying them as little as possible, and offshoring jobs whenever and wherever possible. Reaganomics never worked unless your goal is to shift even more wealth to the already very wealthiest in the country. seems most republican voters have developed a sort of selective amnesia about the 8 years of economic policy under Bush II, or in their little simple brains they rationalize that “it’s obama’s fault” since the recession was at it’s worst during obama’s very earliest time in office. Hey idiots: THE ECONOMIC POLICY OF BUSH JR. AND YOUR BELOVED REPUBLICANS CAUSED THE RECESSION. TRY AND DISCUSS THAT WITHOUT SOME SORT OF WHINING ABOUT CLINTON OR OBAMA. IT WAS BABY BUSH AND YOUR BELOVED REPUBLICANS THAT DONE IT, YOU COMPLETE MORONS.
A good part of the destruction of the USA was caused by NAFTA (Clinton ) and the minuscule economic growth was put in a strangle hold for the last 8 years by the last administration (obama). AND YOU ARE A BIGGER MORON FOR DENYING THE ABSOLUTE TRUTH, You can’t discuss the present economy WITHOUT bringing up those 2 FAILURES (CLINTON AND OBAMA) and BTW comments..HILLARY LOST , CNN is irrelevant , Trump is a 2 term president and your life has no meaning..YOU COMPLETE MORON
John
I have a brother named John and he is schizophrenic a lot how you sound. Is that you bro?
Only when it comes to dealing with numb nuts like you..
Notice how John totally left 8 years of baby Bush republican policy out of his rant, as predicted. Selective amnesia, john?
That’s included loser!…hahahaha! Hillary lost Obama is a fraud.. Bush was ineffective and Clinton is a rapist. so what? you want to keep them.. you can have them.. liberals are still dumber than sheep…time for some big changes .. political correctness is dead and long live freedom of speech ! You are just a turd in the punchbowl of life just like the rest of us.. have a great day OH mis-informed one.. hahahahahaha!
i was not a fan of slick willy or obongo. how am i misinformed?
I just find it necessary to point out that y’alls filth republican party is every bit as broken and corrupt as the dems. Anyone with faith in the R-party is a moron.
Anyone with faith in people is a moron. Faith in God will never disappoint you. Praise Jesus!
Caveat missed the mark by miles. As people spend the money saved by tax reduction the GDP will grow. For every % of growth the tax revenues increase by billions. This the only way the national debt will ever be reduced. No politician will cut programs because it’s political suicide so our only shot is increased revenues from a robust economy.
Already the revived economy has brought the GDP to 3% which BHO claimed could never happen. History and basic economics tells me the corporate and personal tax rate reduction will be a great boom to the economy.
I understand this is beyond the realm of liberal thinking which says “punish the money makers and allow the free loaders to benefit, then they will vote for us”. Tax cuts will help everyone, even those on welfare because increased tax revenues will allow preservation of the welfare system and other programs.
so you’re a “physician” and an economist?
can’t seem to make a comment work on this article
Good advice Howard. Allowing taxpayers, at all levels, to keep more of THEIR money is the ONLY way to grow the economy. And the resulting growth means more taxpayers and higher incomes for many, thereby increasing revenue to the federal government. That said, the federal government is far too big, with out of control spending, much driven by baseline budgeting and self-serving career politicians on both sides of the aisle.
Half of our workers don’t pay any federal income tax and a significant number of those still get a refund. We need to end the EIC, cut social programs and eliminate ACA subsidies, as starters.
The current tax rates are criminal, including for the highest income earners. It’s time to stop the class warfare, demonizing the wealthy. They already pay their fair share and more. And EVERYBODY needs to have some skin in the game.
Let EVERY taxpayer keep more of THEIR money. Some will spend it; some will save it; some will invest it. All results are beneficial to our economy.