TrumpTaxular

Donald Trump released his new tax plan last week in advance of the first 100 days milestone of his presidency. It seemed rather incomplete… but it’s a start for a much needed reform and simplification of the US tax code. Whether the final plan will be good or not, I can’t say. But there are some very important factors to take into account before the outrage ensues. Of course that didn’t stop the usual suspects from chiming in with their ultra-partisan hackery. CNN’s Sally Kohn had her own translation of the plan:

Bernie Sanders, who would have us join the likes of Venezuela in socialist squalor, joined in on the criticism.

Business Insider reported on other senators thoughts, saying “Rep. Ted Lieu called the plan ‘Voodoo economics on steroids,’ while House Minority Leader Nancy Pelosi called the plan a ‘wish list for billionaires.'”

I’m not going to tell you the plan is great. It’s probably not even going to be good based on the kind of healthcare plan he has been trying to push. The thing that bothers me is that any attempt to lower taxes is always met with this kind of autistic screeching. “Republicans hate the poor!” “It’s a tax break for the super rich!” “Trump is a bigot REEEEEEE!!”

If you could just shut the hell up for a second and look past your preconceived notions of ReThugliKKKans, you might learn something.  The idea that that any kind of tax break is just for him and his rich buddies is seriously misguided. While it does benefit the rich, everyone benefits in the long run.  And I’m not talking about “trickle-down economics”, which is a false explanation of Reagan-era policy. The linked article by Thomas Sowell explains that idea in great detail. Here is the introduction:

“Even when the particular tax cut proposal is to cut tax rates in all income brackets, including reducing tax rates by a higher percentage in the lower income brackets than in the upper income brackets, such proposals have nevertheless often been characterized by their opponents as “tax cuts for the rich” because the total amount of money saved by someone in the upper income brackets is often larger than the total amount of money saved by someone in the lower brackets.”

Don’t have time to read the whole essay? Let’s break it down further.  I saw this going around on Facebook and it simplifies the concept very well:

The Tax System Explained in Beer
Suppose that every day, ten men go out for beer and the bill for all ten comes to $100… If they paid their bill the way we pay our taxes, it would go something like this:
– The first four men (the poorest) would pay nothing.
– The fifth would pay $1.
– The sixth would pay $3.
– The seventh would pay $7.
– The eighth would pay $12.
– The ninth would pay $18.
– The tenth man (the richest) would pay $59.

So, that’s what they decided to do.
The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve ball. “Since you are all such good customers,” he said, “I’m going to reduce the cost of your daily beer by $20”. Drinks for the ten men would now cost just $80.

The group still wanted to pay their bill the way we pay our taxes, so the first four men were unaffected. They would still drink

for free. But what about the other six men? How could they divide the $20 windfall so that everyone would get his fair share?

They realized that $20 divided by six is $3.33. But if they subtracted that from everybody’s share, then the fifth man and the

sixth man would each end up being paid to drink his beer.
So, the bar owner suggested that it would be fair to reduce each

man’s bill by a higher percentage the poorer he was, to follow the

principle of the tax system they had been using, and he proceeded to work out the amounts he suggested that each should now pay.

And so the fifth man, like the first four, now paid nothing (100% saving).

The sixth now paid $2 instead of $3… (33% saving).
The seventh now paid $5 instead of $7… (28% saving).
The eighth now paid $9 instead of $12… (25% saving).
The ninth now paid $14 instead of $18… (22% saving).
The tenth now paid $49 instead of $59… (16% saving).
Each of the six was better off than before. And the first four continued to drink for free.

But, once outside the bar, the men began to compare their savings.
“I only got a dollar out of the $20 saving,” declared the sixth man.

He pointed to the tenth man, “but he got $10!”
“Yeah, that’s right,” exclaimed the fifth man. “I only saved a dollar too. It’s unfair that he received ten times more benefit than me!”
“That’s true!” shouted the seventh man. “Why should he get $10 back, when I got only $2? The wealthy get all the breaks!”
“Wait a minute,” yelled the first four men in unison, “We didn’t get anything at all. This new tax system exploits the poor!”
The nine men surrounded the tenth man and beat him up.
The next night the tenth man didn’t show up for drinks, so the nine sat down and had their beers without him. But when it came time to pay the bill, they discovered something important. They didn’t have enough money between all of them for even half of the bill!

And that, boys and girls, journalists and government ministers, is how our tax system works. The people who already pay the highest taxes will naturally get the most benefit from a tax reduction.

Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas, where the atmosphere is somewhat friendlier.

David R. Kamerschen, Ph.D.

Professor of Economics.
For those who understand, no explanation is needed.
For those who do not understand, no explanation is possible.”

Now, to cut the federal revenue by a significant margin without making major spending cuts is a stupid idea. With $20 trillion and counting in debt, lowering taxes does not make much sense on the surface. And if, like this example, you look only at how much the rich are saving it might seem unfair. But what seems more unfair to me is the reality of how much the wealthier classes pay in taxes already.

The Tax Foundation laid out 2014 tax data nicely in this chart:

The thing that should stand out to anyone here is that the wealthiest group ($250k+ annual income) takes in 28% of all income and pays nearly double(!) that in share of the tax burden. That fact alone leaves me extremely frustrated when people like Bernie Sanders whine about the rich not paying their “fair share”. It irks me to no end, and I’m not even close to that level of wealth.

If that’s not enough, take this report from MarketWatch. The richest 20% of people pay 86.8% of taxes, and the bottom 45% of people pay nothing at all! Most of them get extra money back. So please, tell me again what is a “fair share”?

Capture

I would be considered on the low end of middle class, and my tax bill is already insanely high. Ever increasing tax rates make it extremely difficult to do things like buy a home, buy a car, and have money left over for food and other necessities. I for one would welcome keeping a little more of my own money in my pocket and out of the hands of government leeches (bureaucrats and career politicians like Mr. Sanders).

Alas, that is the fundamental difference between conservatives and progressives. Progressives see people as weak and incapable of caring for themselves. They feel that the rich are inherently evil and must have screwed someone else to get to that positions. Like Sally Kohn says, a tax cut for all somehow equates to stealing from the people and giving it to the rich. I suppose when a near majority of people have become dependent on handouts that is how you might see it. If you already pay no taxes of course you won’t see a break.  How could you? I don’t subscribe to the idea that all wealth is ill-gotten. In my experience the opposite is true.  I will have to expand on those ideas in a future post.

Other Sources:

Featured Image: Fortune

Ben Shapiro, Daily Wire: Sally Kohn Beclowns Herself

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