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"As I pointed out yesterday, the projection of an investment boom was never very plausible in any case, but for it to make any sense at all, the tax cuts have to be permanent." (Photo: Yuri Keegstra/Flickr/cc)
Republican Tax Plan Goes for Temporary Cuts and Permanent Lies
The claim of a $1.5 trillion growth dividend can be seen for what it is: a number snatched out of the air to claim the tax cut won't increase the deficit.
Nov 02, 2017
The Washington Post reported that Republicans in Congress are now considering making their tax cuts temporary, so as to reduce their cost over the 10-year budget horizon. The paper neglected to mention that this change would completely undermine the basis for the claim that the tax cut will lead to boom in investment and growth.
This alleged boom is the basis for both the claim that the average family would get $4,000 from the tax cut and that additional growth would generate $1.5 trillion in revenue over the next decade. As I pointed out yesterday, the projection of an investment boom was never very plausible in any case, but for it to make any sense at all, the tax cuts have to be permanent.
The Republicans' argument was that lower tax rates would increase the incentive for companies to invest. But if companies anticipate that the tax rate will return to its current level after a relatively short period of time, then the tax cut will provide little incentive. This means there is no basis for the assumption of a boom.
In the case of a temporary tax cut, the claim that average families will see a $4,000 dividend from higher pay makes no sense. And the claim of a $1.5 trillion growth dividend can be seen for what it is: a number snatched out of the air to claim the tax cut won't increase the deficit.
We are at a crossroads
This country and this world are at a monumental crossroads. US voters have an opportunity to beat back the forces of fascism and confront the billionaires who are rigging the economy, our media system, and our democracy, making it increasingly impossible for ordinary people to get by. We’re not just talking about the election. We’re talking about what must be done once these fascist elements are vanquished from power. We need a bolder set of solutions than what either major party has so far been willing to offer and a working-class movement ready to fight like hell for it. Trump didn't emerge from nowhere. The conditions that fueled MAGA authoritarianism were created by decades of radical neoliberal economic policies and a corrupt political system dominated by corporate interests. They slashed taxes on the super-rich, promising that the benefits would trickle down. They said giveaways to the corporate titans would make life more affordable for the rest of us. It was all bullshit. And when a bitter, betrayed populace searches for someone to blame, right-wing demagogues have little trouble finding scapegoats. People know when they're being lied to, but you won't hear any of this from the corporate media. Only independent journalism—powered and funded by people who believe in building a better world—can deliver truly trustworthy daily news. If you share our vision, please contribute whatever you can to sustain our work. |
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Dean Baker
Dean Baker is the co-founder and the senior economist of the Center for Economic and Policy Research (CEPR). He is the author of several books, including "Getting Back to Full Employment: A Better bargain for Working People," "The End of Loser Liberalism: Making Markets Progressive," "The United States Since 1980," "Social Security: The Phony Crisis" (with Mark Weisbrot), and "The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer." He also has a blog, "Beat the Press," where he discusses the media's coverage of economic issues.
The Washington Post reported that Republicans in Congress are now considering making their tax cuts temporary, so as to reduce their cost over the 10-year budget horizon. The paper neglected to mention that this change would completely undermine the basis for the claim that the tax cut will lead to boom in investment and growth.
This alleged boom is the basis for both the claim that the average family would get $4,000 from the tax cut and that additional growth would generate $1.5 trillion in revenue over the next decade. As I pointed out yesterday, the projection of an investment boom was never very plausible in any case, but for it to make any sense at all, the tax cuts have to be permanent.
The Republicans' argument was that lower tax rates would increase the incentive for companies to invest. But if companies anticipate that the tax rate will return to its current level after a relatively short period of time, then the tax cut will provide little incentive. This means there is no basis for the assumption of a boom.
In the case of a temporary tax cut, the claim that average families will see a $4,000 dividend from higher pay makes no sense. And the claim of a $1.5 trillion growth dividend can be seen for what it is: a number snatched out of the air to claim the tax cut won't increase the deficit.
Dean Baker
Dean Baker is the co-founder and the senior economist of the Center for Economic and Policy Research (CEPR). He is the author of several books, including "Getting Back to Full Employment: A Better bargain for Working People," "The End of Loser Liberalism: Making Markets Progressive," "The United States Since 1980," "Social Security: The Phony Crisis" (with Mark Weisbrot), and "The Conservative Nanny State: How the Wealthy Use the Government to Stay Rich and Get Richer." He also has a blog, "Beat the Press," where he discusses the media's coverage of economic issues.
The Washington Post reported that Republicans in Congress are now considering making their tax cuts temporary, so as to reduce their cost over the 10-year budget horizon. The paper neglected to mention that this change would completely undermine the basis for the claim that the tax cut will lead to boom in investment and growth.
This alleged boom is the basis for both the claim that the average family would get $4,000 from the tax cut and that additional growth would generate $1.5 trillion in revenue over the next decade. As I pointed out yesterday, the projection of an investment boom was never very plausible in any case, but for it to make any sense at all, the tax cuts have to be permanent.
The Republicans' argument was that lower tax rates would increase the incentive for companies to invest. But if companies anticipate that the tax rate will return to its current level after a relatively short period of time, then the tax cut will provide little incentive. This means there is no basis for the assumption of a boom.
In the case of a temporary tax cut, the claim that average families will see a $4,000 dividend from higher pay makes no sense. And the claim of a $1.5 trillion growth dividend can be seen for what it is: a number snatched out of the air to claim the tax cut won't increase the deficit.
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