Do we need tax cuts?
Lots of people agree that our current tax rules are outdated, cumbersome and unfair. On the other hand, there will never be total unanimity on how the tax code should read because one person’s tax cut is another’s tax increase, and for sure no one wants to lose whatever benefits they already have. So the prospect of changes is only palatable as a campaign promise if there would be an overall greater good that everyone recognizes. Such a benefit was proposed during the 2016 campaign as a way to recharge the slow economy. And the conversation has continued from there.
But hold on. The circumstances have changed. Our economy is no longer sluggish. In fact, it seems to have taken off. And, unusually, the economies around the globe appear to have also done so, almost in unison. This rare good news bodes well for the United States and others around the world.
So, back to my original question: Why do we need a tax cut?
If the answer is, for political reasons, that stinks. Just because politicians promised to cut taxes, a regular pledge to get votes, is not good enough to shake the ground on which we live. If the answer is to reallocate wealth, that has never been the role of our capitalist democracy. If the answer is to make more equal the lives of the haves and the have-nots going forward, then simply raise the taxes on the haves in proportion to how much they have benefited from our same capitalist society. And finally, if the answer is to raise revenue in order to reduce our unprecedented national debt, then raise taxes across the board proportionately on everyone who enjoys the services provided by life in these United States.
Sometimes one can get too close to a problem and not see the bigger picture. There is a saying that goes: Are we doing things right—or are we doing the right things? To check on whether we are doing things right, we have to engage in the details, the nitty-gritty of the process. In the case of tax reform, we have to hammer out every line to the greater satisfaction of all concerned. But to decide if we are on the right track, that is, if we are doing the right things, we have to stand back and examine the whole picture. Has the situation changed, perhaps rectified itself, or do we still have to help matters along?
I suggest the latter and I’ll explain why.
Businesses, which will reap three-quarters of the tax proposals over the next 10 years as currently presented, are already, for the most part, doing just fine. That is why the stock market keeps hitting new highs. The prices of the stocks are earnings driven, and the companies we can publicly track via the markets are showing record profits. Why do they need more stimulus? To expand and create more jobs, which is a political mantra? More likely companies will reinvest the additional profits in job-saving equipment, which is the way trends are already leaning. If the government wants to create more jobs, it should help create more businesses, which it could do by offering tax breaks to start-up companies. But that doesn’t require broad tax overhaul. That would just take one change. Mr. President, pick up the pen. Furthermore, to encourage companies to add more workers, offer incentives specifically pegged toward those additional salaries, not tax breaks that can simply result in higher profits in the misguided hope of higher tax revenues.
The initial tax proposals include eliminating deductions for large medical expenses; student loan interest; alimony; tax preparation costs; moving to a new job expenses; casualty, disaster and theft losses; and qualified adoption fees, according to CNBC. Are those the changes we want for our society?
What ultimate goal can we all get behind, and do we get there with tax cuts?