Fiscal Policy: Stop us if you’ve heard this one: Republicans propose pro-growth tax reform to boost the economy, and liberals indignantly shout out: “tax cut for the rich.”
Everyone knows the current tax code is a millstone around the neck of our economy. Almost all the Republicans running for president have admirable tax plans, and one of the best is the flat tax proposed by Texas Sen. Ted Cruz that would lower business taxes to 16% on net business income and 10% on personal income — wages, salaries, capital gains and dividends.
The Tax Foundation says it would boost wages, output and net income about 10% over the next decade — which is an extra $2.5 trillion in GDP and millions of new jobs.
Right on cue, the leftwing Tax Policy Center has trashed the plan, calling it a tax cut for the rich and an $8.6 trillion increase in the debt over 10 years. And the lapdogs of the liberal media ate it up.
The TPC has about zero credibility on these issues. Its tax models predicted the Reagan tax cuts would lead to massive revenue losses and that the Clinton-era capital gains cut would blow a hole in the deficit. In both cases revenues didn’t shrink — they swelled. And the share of taxes paid by the rich soared in each case.
But the TPC’s shattered crystal ball doesn’t let history get in the way of a good story — especially if the theme is class warfare.
The center relies on what is called “static analysis.” It assumes the economy will not grow much if tax rates are lowered and savings and investment are encouraged through a less-punitive tax code. But if the tax rate on working and investing is lowered, then expect more work and more investment. History bears this out again and again.
TPC says high-income taxpayers would get an average tax cut in 2017 of about $6,100, while the poor would save only $46. But most of the poor in the bottom one-third pay almost no income tax at all. How do you cut income taxes for people who don’t pay income taxes?
Nothing could be less fair than our current wreckage of a tax code. The people at the bottom of the income ladder don’t have jobs, don’t have paychecks and don’t have income outside of welfare benefits. The TPC can never seem to figure out what Ted Cruz said when he introduced his flat tax: “The best way to help the poor is with a job — not a government handout.” (IBD)