Two Cheers for the Tax Cuts

Tax reform gives our economy a boost.

For all the Democrat's 8 years of whining that Republicans wouldn't cooperate to pass Obamacare or anything else on Mr. Obama's agenda, not one Democrat voted for the Republican tax cut.  Clearly, Democrat bipartisanship only goes one way.

It wasn't ever reasonable to expect Democrats to participate in passing a Republican-led tax cut that a Republican president will take credit for.  Democrats are terrified that Mr. Trump's nominees and policies will help him make America great again; his visible, demonstrable success would set them back for a generation as did Reagan's presidency.

Accordingly, the liberal media are trying to undermine the Republican assertion that cutting business taxes benefits employees and leads to bigger paychecks by letting businesses keep more of the money they earn.  As they always have, they claimed that "trickle-down economics" doesn't work and that all the benefits go to rich people.

Once again, though, Donald Trump has pulled a massive spectacle out of his hat, showing all America just how wrong the pessimistic view of the left is.  The Atlantic listed companies which have announced that they are going to give their employees raises or bonuses because of the tax cut:

Comcast said it would give $1,000 bonuses to more than 100,000 workers. Fifth Third Bancorp said it would give out bonuses and boost its minimum wage, with the cut giving the bank, in its words, "the opportunity to reevaluate its compensation structure and share some of those benefits with its talented and dedicated workforce." AT&T, Boeing, Washington Federal, and Wells Fargo did much the same.  [emphasis added]

After conceding that these companies' statements that they can share some of their reduced tax bill with their employees sounds reasonable, The Atlantic said:

Contrary to companies' stated reasoning, many of those wage increases and bonuses would have happened anyway, it seems, given how low the unemployment rate is right now.  Though wage growth has been in a long-term slump, paychecks are finally rising as the jobless rate has fallen below 5 percent and stayed there, with earnings growing the fastest for the lowest-wage workers.  Plus, 18 states are raising their minimum wages in 2018, requiring businesses to pay out an estimated $5 billion more to 4.5 million workers[emphasis added]

American workers not employed by the government depend on their employers' continued after-tax profitability to support themselves and their families.  Instead of giving Republicans credit for the wage increases, however, The Atlantic credits the Democrats' compassionate plans to force businesses to pay workers more.

This sounds like sour grapes, which it is, but it also suggests that The Atlantic doesn't really believe the Democrats' doom and gloom talk about how the tax cut will trash the economy.  Instead, they are attempting to position liberals to take credit for whatever economic improvement voters see.

The Atlantic also concedes that the tax cut would enable more business investment which would lead to higher productivity and can lead to higher wages, which is the whole point of the Republican argument:

Businesses would need to use their additional funds to invest in machinery, equipment, and research and development, making their workers more productive, and then paying those workers for that additional productivity.

The article cited above omitted to mention that increased productivity often leads to job loss, particularly at the low end of the economic ladder, but The Atlantic has explained in another article that the more a minimum wage fast-food worker costs, the more an employer can afford to pay for a machine to eliminate the job.

Sawada [a Japanese hotelier] speculates that 70 percent of the jobs at Japan's hotels will be automated in the next five years. "It takes about a year to two years to get your money back," he said. "But since you can work them 24 hours a day, and they don't need vacation, eventually it's more cost-efficient to use the robot."  [emphasis added]

... according to Michael Chui, a partner at the McKinsey Global Institute, many tasks in the food-service and accommodation industry are exactly the kind that are easily automated.

Despite its own article, The Atlantic thinks that boosting the minimum wage will have a positive effect, but the Washington Post described a study commissioned by the City of Seattle to determine the results of the city boosting the minimum wage:

The costs to low-wage workers in Seattle outweighed the benefits by a ratio of three to one, according to the study, conducted by a group of economists at the University of Washington who were commissioned by the city.

On the whole, the study estimates, the average low-wage worker in the city lost $125 a month because of the hike in the minimum. [emphasis added]

Fortunately for low-income workers, Mr. Trump's tax cut will give them back some of that money, but don't expect liberals to admit that their favorite nostrum has failed or that evil Republicans would ever help anyone outside the 1%.

Tax Cuts are Theft?

Nancy Pelosi calls the bill "monumental, brazen theft from the American middle class," and that's one of her more restrained comments.  Per Pelosi, the bill is an affront to the Founding Fathers, veterans, children, and all that's good and true in America.  She also said that the cut reflects the greed of those with power, the cruelty that is in the heart of the tax scam.  Digging deeper into the holiday spirit, she invoked Dickens' Ebenezer Scrooge and Tiny Tim.

She's saying that by cutting taxes, the Republicans have stolen money which our beneficent government would use to provide benefits to "veterans, children, and all that's good and true in America."

This has been the liberal position for many election cycles.  Our "Science Fiction and the Coming Civil War" quoted a 2011 statement by Ms. Pelosi:

But when it comes to a place where there doesn't seem to be shared values then that can be problematic for the country, as I think you can see right now.

The biggest divide is explained by Paul Krugman, the former Enron consultant, who explained the two views:

  1. The affluent must help the less fortunate, and the only way to make sure they do is for the government to take what they earn and spend it helping those who don't work.
  2. Working people have the right to keep what they earn.

There's no middle ground between these views.  We saw this when Ms. Pelosi called the tax cuts "theft" because in her view, letting people keep more of what they earn steals money from its rightful owner, the government.

Either the state owns everything or it doesn't.  Either you have a right to the fruits of your own labor or you don't.  Either tax cuts count as government spending because the government is graciously giving you back what rightly belongs to the government, or tax cuts count as government taking its greedy paws out of your wallet at least in part.

We once had government by the consent of the governed in which your private property was yours.  Under that model, we voters consent to let government take a strictly limited amount of our money to provide necessary services.  Increasingly, however, the left says that what's "yours" is nothing more than whatever regulatory rights and privileges are granted to you by a benevolent state.  The left thinks that so-called "private property" is really a public resource to be regulated and controlled as our rulers see fit.  By the same token, private businesses are really "public accommodations" which must provide whatever services the government says they must regardless of the "owners'" misguided views.

Taxes Are Only 1/3 of the Problem

As President Trump has mentioned many times, taxation is only part of the cost of government; regulatory compliance is as bad or worse.  Total government spending measures the portion of economic output the government allocates to itself.  Although improvements in infrastructure once led to increased economic activity, most government spending is unproductive overhead.

When total cost of government including taxation, regulation, and spending gets too great, society collapses - the cancer kills the patient and they both die.  This elementary fact about government was recognized back in the 14th century but we keep forgetting.

Mr. Trump has greatly reduced the regulatory burden on the economy and he promises to keep doing this.  The New York Times reports:

The remarks highlighted an area where Mr. Trump has perhaps done more to change the policies of his predecessor than any other, with regulatory shifts that have affected wide sections of the economy.

We discussed the hidden costs of regulation back in 2008.  It's gratifying to see that Mr. Trump, whose experience building skyscrapers in New York City has taught him a bit about the costs of regulation, is taking an ax to our job-killing regulations.

So far, we haven't heard much talk about cutting spending.  What Mr. Trump has done on taxes and what he's doing on regulations will boost the economy and make our spending levels less killing, but it really would help to hear "You're Fired!" all over the beltway for the next couple of decades.

Even if he doesn't slash spending, however, two out of three ain't bad.

Will Offensicht is a staff writer for and an internationally published author by a different name.  Read other articles by Will Offensicht or other articles on Bureaucracy.
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