Tax Cuts Make Work More Valuable

Tax Cuts Make Work More Valuable

By VERN WUENSCHE

We will work longer and harder if we receive more for our efforts. President Trump’s tax cuts will cause this to happen, improving our economy and likely even our culture. Tax cuts were implemented by Kennedy, Reagan, and Bush.  And the Treasury in the following years always showed an increase in tax revenue. And one might note that  Reagan’s tax cuts expanded the American economy for 25 years.

Democrats and liberals never consider this history.  They assume that a reduction in taxes will reduce the revenue received by Uncle Sam by the exact mathematical amount caused by the rate reduction. According to their lights, there is no change in a taxpayer’s behavior because of tax cuts.  This incorrect view is called static scoring.

Republicans and conservatives believe otherwise. They believe that after a cut in any tax rate, humans will work harder and longer because they are receiving more benefit for each hour worked and for each additional hour worked.  As a result, more products and services will be produced, which in turn will create more profit, which when taxed will produce increased revenue for the government.  Consider this:  A taxpayer who is taxed at a rate of 20%, keeping 80%, would get up in the morning and go to work as always producing a full day’s production.  If the same taxpayer were taxed at 50%, keeping 50%, he would likely show up much less and produce much less.  And if he were taxed at 100%, keeping nothing, he would not show up at all and produce nothing. The government would receive more tax revenue in the former instance and none in the latter. The level of taxation does change a taxpayer’s behavior.  This correct view is called dynamic scoring.

The reason for the difference between the two views is quite simple. Democrats and liberals do not find there to be a strong relationship between money and work.  The concept of being incentivized to work harder to increase their income is foreign to them simply because many of them do not work.  And for many Democrats, the money they receive is a result of government spending, not their working for it.  And to provide revenue to support this view they believe that the supply of government revenue is unending.  Look at Obama who doubled the deficit from $10 trillion to $20 trillion in eight years in office without improving the economy. It is hypocritical now for Democrats to be concerned that tax cuts will increase the deficit. They do not understand or want to understand dynamic scoring.

With liberal’s right brain sensitivities or their unwillingness to recognize reality, they do not acknowledge how our economy works either. They use class warfare to decry tax cuts or anything that allow the rich to keep more of their money.  Yet today the top 1% of income earners now pay 38% of all taxes.  They pay more taxes than the bottom 90% combined. But they do not bury their money in their backyard, which by doing so would eliminate any future economic impact from it.  No, they do a number of things.  Some is placed in a bank where the bank to increase its profits is allowed by law to lend out many times that amount to businesses large and small.  These businesses then are able to expand, creating more profit which when taxed increases revenue to the government.  Some is invested in the stock market where the business whose stock is purchased now has more money to expand, creating more profit which when taxed increases revenue to the government.  Some is used by them to make large purchases which create more profit for the seller which when taxed increases revenue to the government.  The poor do not have such options.  And as Sean Hannity is fond of saying, few receive a job from a poor person.

Additionally, cutting the estate tax to zero helps taxpayers, the American economy, and its culture.  A taxpayer has had his earnings taxed all his life.  Taxing it again at his death is fundamentally unfair.  And particularly to that person’s survivors who are often forced to sell the deceased’s assets to pay the tax.  These assets are often family farms which have been operated with greater and greater efficiency with each generation over many years. Breaking them up not only destroys this efficiency but also reduces the stability of the heartland’s bedrock culture. The left knows this and uses the high estate tax as one more technique to destroy American culture as they have been methodically doing through the media and with abortion, political correctness, gender weirdness, and even the NFL.

Tax cuts will expand the economy, save Americans a great of time complying with an outmoded tax system, and will even improve American culture.