The Big 3 Tax Cut Lies That Democrats Keep Telling

Aug 30, 2017 by

Income Taxes: With President Trump turning his attention to tax reform, Democrats are busy dusting off their shopworn claims about federal income taxes. Almost nothing they say about taxes is true.

Trump plans to make a pitch for tax reform on Wednesday at an event in Springfield, Mo. He will likely explain that tax cuts are the key to a bigger economy, more jobs and increased incomes. Pundits are busy explaining that getting tax reform done this year won’t be easy. True enough. But it will be made more difficult because of misinformation spread by Democrats and their allies in the press about the U.S. tax code.

Here are the three big lies:

Bush tax cuts didn’t work. “The American people,” says Winnie Stachelberg of the Center for American Progress, “know from experience under the Bush era that tax cuts for millionaires and corporations will not benefit the U.S. economy, jobs, or the middle class.” They also supposedly boosted the deficit.

Democrats have been peddling this lie for so long that no amount of hard data will likely stop them. But here goes, anyway.

Federal deficits steadily declined after Bush signed the 2003 tax law, which retroactively cut income tax rates — the deficits dropped from $470 billion in 2004 to $167 billion by 2007.

The economy perked up, with GDP jumping 6.9% in Q3 2003 and 4.8% in Q4. In the six quarters after Bush signed those tax cuts, average quarterly GPD growth topped 4%, compared with 2.1% in the previous six quarters. Anyone want to guess how Obama’s tax hikes affected GDP growth?

By the end of 2007, the unemployment rate had dropped to 4.7% — down from 6.1% when Bush signed the 2003 tax cuts into law. Median household income climbed 3%. Income inequality, meanwhile, didn’t change at all.

It was the financial crisis — which, as we have repeatedly shown in this space, was caused by misguided federal policies first enacted under President Clinton — that erased these gains.

The rich don’t pay their fair share. “The last thing we need is for the tax code to be even more rigged in favor of millionaires, billionaires, and corporate insiders,” claims the organizers of Not One Penny, a liberal coalition that includes the George Soros-backed

If by “rigged” liberals mean a tax code under which the top 1% pay 39% of federal income taxes — which is up from 33% in 2001 — and that U.S. the most progressive in the industrialized world, then we’d agree. But the idea that the “rich don’t pay their fair share” is utterly false.

In fact, one reason tax cuts always seem to benefit the rich more than the middle class is precisely because the tax code is so heavily skewed toward the wealthy. According to the IRS, the bottom 50% of taxpayers account for less than 3% of federal income taxes paid.

As for corporate taxes, the U.S. imposes the highest corporate income tax rate of any industrialized nation — up to 40% when federal and state taxes are combined. Yet it has one of the lowest collection rates as a share of GDP. Why? Because the code is riddled with loopholes that benefit “corporate insiders.”

The GOP plan is to cut the tax rate, close loopholes and simplify the code. The only losers will be companies that on political connections and gimmicks to lower their tax burden.

Tax reform must be ‘revenue neutral’. “At a bare minimum, tax reform should not lose revenues,” declares the liberal Center on Budget and Policy Priorities.

What they and other Democrats mean by this is that any tax cuts must be offset by tax hikes somewhere else, and that no account can be made of the growth effect of tax cuts.

But the idea the tax reform must be revenue neutral is based on a myth that taxes are at an acceptable level today. The fact is, they are historically high. As it stands, taxes as share of GDP will be 18% this year, which is well above the 17.2% average since World War II.

The reason the federal government is running deficits is because spending will equal 21% of GDP this year, which is also well above the post-War average.

Clearly, then, the country doesn’t have a tax problem, it has a spending problem, which means that both taxes and spending should be cut. And, since tax cuts will boost economic growth, at least some of the revenue “lost” to tax cuts will be regained from an expanded economy.

One final point worth keeping in mind. The mainstream media won’t correct any of these lies, despite their supposed role as guardians against “fake news.”

Source: The Big 3 Tax Cut Lies That Democrats Keep Telling | Stock News & Stock Market Analysis – IBD

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