The Patriot Post® · Taxes — Spin and Reality

In the spin battle leading up to the passage of Trump’s tax cut bill, it was not a fair fight; the DEMs and their media allies routed team Trump.

Reality is that the tax cuts are primarily business oriented, designed to accelerate the economy and make USA business more competitive world wide; and that’s a good thing. Team Trump tried to portray this as a middle class tax cut, and while the middle class does benefit and over 90% of Americans are estimated to get a tax cut, the majority of the tax savings dollars do accrue to businesses and the top 20% of tax payers; not surprising since they pay the vast majority of taxes and if you are going to cut taxes, that’s where the bucks go. Team Trump, maybe too clever by a half, claimed that the middle class would “benefit” the most from the tax cuts, but in the fine print attributed that to the added employment, increased wages and other opportunities that businesses were expected to provide to the middle class. Again, perfectly fine, but a bit hard to connect the dots, and the media ignored it.

The DEMs portrayed the tax cuts as disastrous, Armageddon, and even stealing from the middle class to give tax cuts to……..ready?……the “rich”. Their talking points, citing one of those ubiquitous “independent/non-partisan” tax study groups, stressed that “83% of the cuts are going to the top 1%”, with the middle class actually seeing their taxes increase. That was an accurate claim only if you took the fact that the individual tax cuts expired late in the forecast period, and would not be renewed. That was driven mostly by the inane Senate budget rules that governed projected deficit requirements; and completely ignored the upside down logic that these types of tax reductions are almost always renewed, and would need DEM votes to raise taxes on the very middle class they cite, eight years from now. Yet not only did the media dutifully report this head scratcher as gospel, but they used it to generate polling data.

In classic design the poll question to elicit the desired predetermined answer, and then report that as accurate public sentiment, we were treated to poll questions that sounded like this – do you support the partisan GOP tax scheme that raises taxes on the middle class to give 83% of the tax cuts to the richest 1%? If someone had called me on that one I would have said NO, so it’s a bit surprising that the poll numbers showed only 2/3 of the folks against it. The DEMs and the media then used that to try to cower the GOP into voting against the plan, and they almost succeeded. The NY Times even tried to pitch the tax cuts as dangerous because the current economy is so good that tax cuts aren’t necessary and will cause inflation. You know the DEM/media complex is scared the GOP will succeed and get the credit, if they resort to praising the Trump economy as a way to stop tax cuts. No doubt there were deals cut that bought off some Senators and showered goodies on the lobbyists, but still It’s a real credit to Trump and the GOP leaders that they held together and got this done.

The DEMs are now stuck with what clearly was a “resistance” gambit that has failed. They are on record saying that the tax cuts that in reality will show up in the paychecks of their constituents early next year, would never happen. Truth is that folks could care less what the tax analysis folks say about 2026; but they care a lot about 2018. And the DEM spin on the amount of the cuts to the middle class was almost incomprehensibly stupid. Trump trotted out his show time families to demonstrate what the tax cuts would mean in the real world, as all presidents do. In general you had families with kids making in the $75k range seeing their taxes go from $2,500 to $2,000. Depending on how much you want to spin this, it is either a $500 cut, or a 20% cut, or as the DEMs portrayed it……..ready for this……..a cut of only $1.40 a day.

Clearly blinded by their Trump derangement syndrome, and their inability to connect with average folks who unlike their wealthy bi-coastal donors and elitist greenies, look at $500 or $1,500 (what is considered the average middle class tax savings) as real money that can help with gas purchases, home payments or even a non-St. Bart’s vacation. Toss in what came across as DEM rooting for the economy to fail, and corporate bashing that was turned on its head by seeing AT&T and several others giving $1,000 bonuses that they credited the Trump plan for; and the only thing having worse optics would have been if the DEMs added the adjective “deplorables”.

And speaking of the bonuses, huge kudos to whomever in the Trump administration came up with that idea. The media tried to portray it as some kind of evil conspiracy or quid pro quo between Trump and corporations, but that’s exactly backwards. If Trump was behind the move, and I believe he was, then good for him, and really good for the recipients and the companies. It’s spectacular optics, great politics (perfect for making the DEMs look silly……..let me rephrase that…….sillier), and even good economics for the corporations. Just like those of us who are exploring prepaying our 2018 property taxes this week, the corporations get the benefit of the higher deduction rate if they pay out in 2017, A win/win for everyone, except the DEMs and the media.

And what about other aspects of the deal like opening up ANWAR. DEMs and the media, who in spite of an 18 month effort by the FBI, Mueller and every media outlet on the planet that has come up empty in trying to find collusion between Trump and Russians (who supposedly desperately wanted him to be president), are scrambling to explain why Trump would add ANWAR to the mix in what has to be Putin’s worst nightmare. The Russian economy depends on high fossil fuel prices, and the Russian hold over European countries depends on their energy supply monopoly; ANWAR goes a long way to undercutting that state of play, so why exactly did Trump do that if he owed his election to collusion with Putin?…….just askin’.

And thank you Mr. Chief Justice for making the Obamacare mandate a “tax” issue. The DEMs tried to spin the mandate elimination as causing another 13 million people to “lose” insurance coverage since as their theory goes, if folks no longer have to pay the mandate tax they will be less likely to buy insurance. Of course that would be a personal “choice” not a “loss” that supposedly would have been dictated by the GOP, but that’s the spin. Reality is that this is the first step in dismantling Obamacare, since the economics of the ACA fall apart without the mandate “tax”; and in order to balance the books premiums under Obamacare will shoot up, and there will be no option except to replace it; an unexpected benefit of the tax deal, and a great backdoor way to get the GOP at least partially off the hook for failing to replace it earlier this year.

And then there’s the deficit. All of a sudden, the same DEMs who cheered a doubling of the national debt to $20 trillion under Obama have now morphed into fiscal hawks; and are shocked/shocked to find that the Trump tax plan (again, according to the same non-partisan geniuses who have no clue how to factor human behavior onto their work) is likely to add $1.5 trillion to the national debt over ten years. Team Trump pushed back on this, with the debate centering on how much the tax cuts would stimulate the economy. This is an unknowable, but combined with the effort to reduce regulations and encourage business formations/expansions it is not unreasonable to believe that those previously shackled with a new normal expectation of 1.5% annual growth, will leap onto the 3-4% bandwagon, which would more than wipe out any new deficits.

But what has been lost in this dance on the head of a pin discussion is that the current budget calls for accumulated deficits over the next ten years of around $9.5 trillion, so the gamble to accelerate the economy even in the worst case would add only another 10% to the already expected debt; not as bad a bet as the media would like you to think. Furthermore, the ball game is the budget, and the focus on the tax plan in isolation has it exactly backwards. Would be nice if the government did what corporations do, namely figure out first what you want to accomplish (what you want government to do) and then look at the funding; and if there is a mismatch based on whatever funding criteria you apply, then make the adjustments. The government never tries to define what it should be; that would be really hard; and I can’t recall anyone in government ever defining what the optimal national debt level is. It’s either ignored as in the last 8 years, or knee jerk viewed as bad by the so called fiscal hawks; but perhaps an assessment of the factors that determine the optimal debt level might be a nice thing to add to the equation as the budget is being determined.

But no, instead of being the driver, the budget seems to always get short shrift; useful only to generate a potential government shutdown debate, and provides political fodder for who is going to be blamed for an event that never happens. Has there ever been a more wasted calorie burn than the shutdown debate? Would be refreshing to see the slate wiped clean, and the real debate begin with the role of government and what we want the government to actually do. Let that determine the tax funding needed. OK; I can dream.

I would have preferred to see the tax plan wipe out all deductions and lower rates across the board to reflect the needed government revenue. But the tax code is the primary source of Congressional leverage with lobbyists and donors, so that was never going to happen. It should still be the goal, and maybe this will turn out to be just the first step of what is feasible in the near term. Bottom line is that the pols were not going to give up their quid pro quos, and the result is more a statement of the strength of the swamp, and not the economics since the dollars involved in special interest goodies get lost in a $4 trillion economy. But that doesn’t diminish the Trump accomplishment in getting the deal over the finish line. The reality is that the results will speak for themselves one way or the other, by the time the 2018 elections roll around. Like Trump, my bet is on America; DEM and media bets are not. I’ve always believed that there was a huge economic engine kept in idle over the last eight years, and tax cuts and regulation reform would shift it into gear. The spin is over; and we’re about to find out who is right.