Following the article's logic, in 2028, Robot Bernie Sanders will become the first cyborg president, running on a platform of a "Neo Deal", which will replace Social Security with Universal Social Welfare (UBI), consolidate Medicaid and Medicare into Universal Medicine (NHS), and of course a massive infrastructure package.
Right now, the stock market is hitting all time high's just on the idea of a tax cut. Is it possible that it's investor's faults? They propel the market too high on tax cuts, and then it corrects in a crash?
Not that I'm an economist, but there's more of an intuitive link between tax cuts -> profits -> stock market gains than there is between tax cuts -> ... -> underconsumption -> Great Depression.
Edit: Although after reading a bit more about this, it seems like you're on to part of the Keynesian explanation in which tax cuts are only partially responsible but goes something like tax cuts -> profits -> stock market gains -> overinvestment -> overproduction & underconsumption -> Great Depression. Although there are definitely some factors I left out there that have to do with their explanation for why it was the Great Depression that time around and not just a more typical recession, which they attribute to the same cycle which is supposedly inherent in capitalism without government intervention.
It's been forever since I've read about this, so I don't have much, but even just looking at the wikipedia page[1] the view expressed in this article seems to sort of fit with the Keynesian and to a lesser extent Marxist views listed. However, even those are a lot more complicated than what's in this article, which seems to be an oversimplification at best. What I was reading many years ago was likely from the perspective of a Monetarist, so it could have been a bit biased. Even so, the Keynesian view doesn't really seem to boil down to "tax cuts caused/exacerbated underconsumption which helped lead to The Great Depression".
What I find conspicuous by its absence in the author's list is that the tax bill removes the $4,050 exemption for dependents. It seems like that would be a major tax increase for large families. It's very peculiar that Republicans would be mounting an assault on families with children, presumably a core constituency, and also odd that people opposed to the GOP aren't emphasizing it more.
Perhaps that's what the Senate bill was like, but last time I checked the House bill did the opposite by expanding the child tax credit. Based on what we've seen them advocating for within the last decade or so, I would expect the end result will include a bigger deduction/credit for children.
The House bill seems to expand the child tax credit and add a family tax credit, but it also removes the personal exemption, so it's unclear to me how that nets out. But it sure creates uncertainty if nothing else.
The credits and the expanded standard deduction outweigh the removal of the personal exemption, especially with the rate changes. The House bill is fairly straightforward in regards to low to middle income families.
From the NY Times link I provided, I see the following:
+1.6 trillion repealing personal exemption
-0.64 trillion adding child and family credits
-0.92 trillion increasing standard deduction
So it does not seem as though the new credits and standard deduction outweigh the personal exemption overall. The net for these things is a small tax increase. And then there are the other deductions that are going away, so it seems like a net increase for average people, to provide AMT cuts, corporate cuts, and estate tax cuts.
Thats not the full picture though. You've got the rate changes and the increased standard deduction. Most of the changes you've mentioned are bad for upper middle income people who are going to benefit the most from the lower rates in the new tax brackets. Plus, lowered corporate tax rates are likely to drive prices on goods down as well. It seems that very few if any people will end up with a net tax increase. Seems graduate students at prestigious universities won't do well in the short run. But I have a feeling they'll probably be fine when they graduate and get six figure salaries.
Overall, I'm still not a huge fan of the proposal though. Too many cuts for the rich and not enough for everyone else.
I mentioned the increased standard deduction. That's a major factor in making it almost break-even.
I'm not sure any reputable economist would tell you that cutting corporate tax rates will necessarily drive prices of goods down.
If a business gets more money, there are a bunch of things they can spend it on besides lowering prices - they can invest, they can raise wages, they can put the money into dividends and buybacks. It seems like the way the stock market has been appreciating recently, that dividends and buybacks are what the smart people are banking on.
The most direct way to cut the price of goods would be to cut sales tax - that isn't federal, but perhaps the federal government could induce states and localities to reduce or eliminate sales tax. If that could be done, then it would be an enormous boon to interstate commerce too. But of course the revenue would have to be made up through increasing income taxes. Anyway, if there was a political movement for this, I would like to join it - kind of the opposite of the flat tax, national sales tax, or VAT advocates.
Take a Married couple, no kids, $70,000 AGI, all W2.
If they take a standard deduction today, that's $12,200 for the deduction ($500 more with kids) + $8,100 in exemptions, so their taxable income is $49,700. At current tax rates that's $7,198.
Even if they itemized at the new proposed standard deduction of $24,400 (!!! One-third of their gross income, highly unlikely), that's a tax bill of $4,693.
Add in 2 kids ($8,100 more in exemptions) and their tax bill becomes $2,208 ($4,288 - 2 $1,000 child tax credits)
Under the proposed plan, same people:
$70,000 minus $24,400 standard deduction = $45,600 taxable income, that's $5,472 in taxes, minus $600 family tax credit, for a tax bill of $4,872. So net savings of $2,326 vs. standard deduction and a slight increase of $177 vs an itemized deduction of similar size to the new proposed standard.
The GOP plan calls for an increase in the child tax credit from $1,000 to $2,000. If we do the same, we see that the two kids will reduce their total tax bill to $872, an improvement over both prior scenarios. (Again ... $872 out of $70,000 AGI.)
And Marco Rubio's amendment is asking to make the child tax credit refundable against payroll taxes (so instead of just paying $0 if you were in the net negative you'd actually get the overage back.)
So changing the couples' income to $40,000:
* Current SD, no kids = $1,948
* $24,400 Itemized Deduction, no kids = $750
* New SD, no kids = $1,272
* Current Standard Deduction, 2 kids = $0
* New SD, 2 kids = $0
* New SD, 2 kids, Rubio amendment = you get $2,728 back from the government
I look at the efforts my Marco Rubio (Florida) and Mike Lee (Utah) to increase the child tax credit further as efforts to redistribute to said large families. It's currently at $2000/child and they're pushing for a larger number via an amendment.
From my perspective trickle down doesn't work, so my question is...what's the long term benefit of this to rich people? Is it as simple as increase wealth as much as possible in the short term and figure out the rest later?
The author's connections between trickle-down economics and depression/recession seems simplistic. It's really not clear that the wealth disparity is what caused the depression or the great recession either. That said, I found his elucidation of what's actually contained in this tax plan to be useful, and strengthens my perception that it will lead to increased wealth concentration.
Or, you know, maybe his ideas aren't really based on any sound theory at all.
I personally believe that the Austrian business cycle theory has a much better chance of being right than "look, the Republicans did this then the economy crashed 2 decades later" but what do I know, I'm neither a economist nor a historian.
ok, to be totally honest, I'm actually an art historian.
From the Huffington Post's bio of the author:
"Robert S. McElvaine is the Elizabeth Chisholm Professor of Arts & Letters and Professor of History at Millsaps College and the author of ten books and hundreds of articles and op-ed pieces. He has contributed to the speeches of several Democratic presidential candidates."
Of course he doesn't see any good in the bill. History will tell us if he's right or just wrong in his biases.
I would call this current incantation of a tax bill the "Squeeze the Middle" it seems they will be hit the most.
I would have love to have seen a better pass through rate for mom and pop small businesses. I cannot understand why we need to give large conglomerates a break, places like GE paid almost zero taxes in recent years due to loopholes. How is lowering the corporate rate to 20% going to change that?
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[ 2.5 ms ] story [ 87.1 ms ] threadEdit: Although after reading a bit more about this, it seems like you're on to part of the Keynesian explanation in which tax cuts are only partially responsible but goes something like tax cuts -> profits -> stock market gains -> overinvestment -> overproduction & underconsumption -> Great Depression. Although there are definitely some factors I left out there that have to do with their explanation for why it was the Great Depression that time around and not just a more typical recession, which they attribute to the same cycle which is supposedly inherent in capitalism without government intervention.
Good analysis.
[1] https://en.wikipedia.org/wiki/Great_Depression#Mainstream_ex...
https://www.nytimes.com/interactive/2017/11/15/us/politics/e...
So it does not seem as though the new credits and standard deduction outweigh the personal exemption overall. The net for these things is a small tax increase. And then there are the other deductions that are going away, so it seems like a net increase for average people, to provide AMT cuts, corporate cuts, and estate tax cuts.
Overall, I'm still not a huge fan of the proposal though. Too many cuts for the rich and not enough for everyone else.
I'm not sure any reputable economist would tell you that cutting corporate tax rates will necessarily drive prices of goods down.
If a business gets more money, there are a bunch of things they can spend it on besides lowering prices - they can invest, they can raise wages, they can put the money into dividends and buybacks. It seems like the way the stock market has been appreciating recently, that dividends and buybacks are what the smart people are banking on.
The most direct way to cut the price of goods would be to cut sales tax - that isn't federal, but perhaps the federal government could induce states and localities to reduce or eliminate sales tax. If that could be done, then it would be an enormous boon to interstate commerce too. But of course the revenue would have to be made up through increasing income taxes. Anyway, if there was a political movement for this, I would like to join it - kind of the opposite of the flat tax, national sales tax, or VAT advocates.
Take a Married couple, no kids, $70,000 AGI, all W2.
If they take a standard deduction today, that's $12,200 for the deduction ($500 more with kids) + $8,100 in exemptions, so their taxable income is $49,700. At current tax rates that's $7,198.
Even if they itemized at the new proposed standard deduction of $24,400 (!!! One-third of their gross income, highly unlikely), that's a tax bill of $4,693.
Add in 2 kids ($8,100 more in exemptions) and their tax bill becomes $2,208 ($4,288 - 2 $1,000 child tax credits)
Under the proposed plan, same people:
$70,000 minus $24,400 standard deduction = $45,600 taxable income, that's $5,472 in taxes, minus $600 family tax credit, for a tax bill of $4,872. So net savings of $2,326 vs. standard deduction and a slight increase of $177 vs an itemized deduction of similar size to the new proposed standard.
The GOP plan calls for an increase in the child tax credit from $1,000 to $2,000. If we do the same, we see that the two kids will reduce their total tax bill to $872, an improvement over both prior scenarios. (Again ... $872 out of $70,000 AGI.)
And Marco Rubio's amendment is asking to make the child tax credit refundable against payroll taxes (so instead of just paying $0 if you were in the net negative you'd actually get the overage back.)
So changing the couples' income to $40,000:
* Current SD, no kids = $1,948
* $24,400 Itemized Deduction, no kids = $750
* New SD, no kids = $1,272
* Current Standard Deduction, 2 kids = $0
* New SD, 2 kids = $0
* New SD, 2 kids, Rubio amendment = you get $2,728 back from the government
I personally believe that the Austrian business cycle theory has a much better chance of being right than "look, the Republicans did this then the economy crashed 2 decades later" but what do I know, I'm neither a economist nor a historian.
ok, to be totally honest, I'm actually an art historian.
Of course he doesn't see any good in the bill. History will tell us if he's right or just wrong in his biases.
Meanwhile, MSNBC has this title today: "An open letter to Congress signed by 137 economists supporting GOP tax reform bill"
I would have love to have seen a better pass through rate for mom and pop small businesses. I cannot understand why we need to give large conglomerates a break, places like GE paid almost zero taxes in recent years due to loopholes. How is lowering the corporate rate to 20% going to change that?