“I am in favor of cutting taxes under any circumstances and for any excuse, for any reason, whenever it’s possible.” —Milton Friedman
Trump’s Tax-Cut Stimulus Could Help Decrease the National Debt
President Trump wants to cut the corporate tax rate to 15%, but many in Congress unwisely oppose the cut, because it would not be revenue-neutral. Throughout American history, however, tax cuts have increased collections into the government treasury. The record deficits racked up by Congress in the 1980s were the result of an unwillingness to reduce spending. Increased revenue was coming in from the Reagan tax cuts, but the Congress spent more than the increase justified. Trump’s plan to cut taxes is sound, but the Congress must also cooperate by choosing to overspend.
The Unfairness of the Socialist New Party’s Idea of Fairness
In a presidential primary debate in 2008 Barack Obama, a member of the socialist New Party, and concurrently a member of the Democrat Party, was debating Hillary Clinton. The moderator mentioned Bill Clinton’s reduction of the capital gains tax from 28% to 20%, and George W. Bush’s lowering of the tax to 15%. “In each instance, revenues from the tax increased. The government took in more money. . . . So, why raise it at all?” Obama wanted a tax increase “for purposes of fairness,” he explained. “Part of what has happened is that those who have been able to work the stock market, and amass huge fortunes on capital gains, are paying a lower tax rate than their secretaries. That’s not fair!”
But what Obama left out entirely was the fact that many of the secretaries he mentioned had 401(k) Individual Retirement Accounts that needed to earn money on the stock market for them to be able to retire. Obama’s economy, while he was president, saw IRA earnings suffer. Many retirees came out of their retirement. Income disparity was reduced overall by impoverishing these retirees, but was that really fair?
Americans Want Their Financial Freedom Back
Blue-collar workers rebelled against Obama-style social policy in a big way, during the 2016 election, when they decided to elect a decidedly pro-American, anti-socialist candidate to the office of the presidency, to regain their financial freedom and raise their standard of living, bringing back the possibility of retirement once again.
They made the right choice. So far, only six months into Trump’s term, unemployment is at a 16-year low, and the economy is booming, experiencing levels of growth that never could have existed with yet another socialist, like Hillary Clinton, in the White House. Socialists excel at growing government’s coercive power and weakening the financial strength and freedom of the private sector through high-tax, low-growth policies, all the while crying “fairness” and “wealth redistribution” at the tops of their lungs to incite the envious and the idle to support them.
Socialism Can Only Spend the Money Capitalism Has Earned
But the fairness socialists cry out for only comes about in the form of equal impoverishment for everybody, proving that “redistribution of wealth” is a misnomer; what occurs in reality is “redistribution of poverty,” as the added costs of higher taxes and increased regulations shackle economic growth, thereby hampering the tax collections needed to support welfare funding. In the end, socialism can only spend the money that capitalism has earned.
Expanding government, with a contracting private economy, during the Obama years, proved a recipe for disaster, doubling the national debt and throwing many previously self-sufficient entrepreneurs into the ranks of failing businesses. It is ironic that Obama called George W. Bush “unpatriotic” for adding four trillion to the debt in the eight years, when Obama added that much debt in less than three years. While Democrats and the media cheered this characterization of Bush, they excused Obama for doing much worse. Obama’s deficit-spending over eight years surpassed that of all previous American presidents combined.
With Trump at the helm, America’s ship of state will begin to steer in the direction of less regulation and lower tax burdens. The resultant expansion of the economy is expected to decrease the amount shared liability Obama created in doubling the debt. At the same time, Trump’s policies will enrich Americans, enabling them to buy more products in the marketplace, benefiting businesses both at home and abroad. The world economy will be impacted positively by an economically stronger America. And, as every honest economist knows, free-market economies have succeeded in lifting more people out of poverty than any other economic system. It has worked for America in the past, and it will work for America again. President Trump has said, “The era of economic surrender is over—and a new national pride is sweeping across our land.”
The Wealth of Nations
Bono, who, besides being an entertainer, is an anti-poverty activist once said, “Entrepreneurial capitalism takes more people out of poverty than aid.” Bono was speaking to Georgetown’s Global Social Enterprise Initiative when he made the statement.
Bono is well aware of the fact that, up until Adam Smith wrote The Wealth of Nations—which helped to birth the Industrial Revolution—the large majority of humanity was poor. Even the wealthiest of America’s Founders did not have as high a living standard as the poor people living in America today, who own iPhones, drive cars, and live in air-conditioned homes with electricity, running water, modern kitchen appliances, and flush-toilets.
The reason America’s poor are richer than many “wealthy” people in socialist economies worldwide—is free-market entrepreneurship, or capitalism. To quote Charles Murray, “From the dawn of history until the 18th century, every society in the world was impoverished, with only the thinnest film of wealth on top. Then came capitalism and the Industrial Revolution. Everywhere that capitalism subsequently took hold, national wealth began to increase and poverty began to fall. Everywhere that capitalism didn’t take hold, people remained impoverished. Everywhere that capitalism has been rejected since then, poverty has increased.”
The change from almost-universal poverty to almost-universal wealth started in the West, where Adam Smith’s ideas of free trade first took hold. But now Smith’s ideas are spreading to many other areas around the globe. Russia was poor under Soviet Communism, until Soviet leaders dissolved the Marxist command-and-control oligarchy. Russia has since adopted economic policies much more conducive to facilitating free-market forces and has much less poverty today than it did only one generation ago. China, too, has lifted 700 million people out of poverty by allowing its own form of capitalism to rise. And, since 1991, in the wake of Reagan’s presidency, India has also rid itself of the socialism that was keeping India poor, embracing capitalism instead.
In contrast to all of this, an America blinded and deafened by the blaze and roar of its Leftist-controlled media chose a New Party socialist for president in the person of Barack Obama, the irony being that, while other countries prospered by using the American model of capitalism, America was voluntarily impoverishing itself by ignoring its own traditions of empowering individuals and rewarding hard work and innovation in a competitive environment. Instead, America was fast becoming a state-run, state-regulated economy, devoid of independence or innovation in any dynamic sense, all in a misguided attempt to create income equality. Milton Friedman once said, “A society that puts equality before freedom will get neither. A society that puts freedom before equality will get a high degree of both.”
A Time for Freedom
Investor’s Business Daily reported on December 10, 2012, that “[c]apital gains tax rates were cut from 28% to 20% in 1981, again from 28% to 20% in 1997, and from 20% to 15% in 2003. Capital gains tax revenues grew by an annual average of 15.8% from 1981-84, 17.8% from 1997-2000, and 25.5% from 2003-06.” This means that, if you really want to take from the rich, then lower their taxes! You will get much more money out of them if you do so. At the same time, you will lessen burdens and increase freedom for all Americans by making tax cuts.
Obama knew a tax cut would raise revenues to offset his increased spending on social programs, but he raised taxes instead, to increase shared liability in the form of a higher national debt. Obama weakened America and made Americans less financially free by doing this, which is a goal of the International Left, their belief being that it is not fair that America is freer and stronger than other countries. The Left wants international income inequality to be solved by making America poorer, when the moral answer to the problem of poverty is for other countries to empower their workers to create more wealth, using free-market capitalism, the way Russia, China, and India are now doing.
A Revenue-Neutral Tax Cut Is Unnecessary
Calvin Coolidge, upon succeeding to the presidency when Harding died in 1923, cut taxes drastically, causing the top rate to fall from 73% to 25%. Tax collections almost doubled! John F. Kennedy also cut FDR’s tax rate for top earners from 90% down to 70%, when he cut taxes 20% across the board for all Americans, saying that a “rising tide lifts all boats” and causing rapid economic growth to occur from 1965 to 1968, spurring tax collections to grow at an 8.6% annual average and lowering unemployment to 3.4%.
The Reagan Reductions
When President Reagan reduced the top tax rate from 70% down to 50% in his first term, and then to 28%, a historic economic boom occurred that saw the American worker, over the next quarter of a century, gain 33% in overall personal wealth! This kind of thing could happen again under President Trump, if Congress would cut taxes as President Trump desires. Reagan’s tax cut was not revenue-neutral when it was passed, but it took into account the human equation based upon the motivation being provided by getting to keep more of one’s own earnings in return for working hard. The unmistakable result was that people were willing to work more and take the risks needed to generate the extra economic activity that raised tax collections to new highs.
As the rich became richer, due to Reagan’s cuts, so did everybody else. The leaders of the Left, such as Barack Obama and Hillary Clinton, argued that an attendant increase in income disparities between rich and poor resulted. But why does that matter, if everyone is getting richer? Why kill the goose laying the golden eggs in order that everyone might be equal in their poverty, rather than unequal in their wealth attainment?
More Financial Freedom for All
To increase tax collections “big-league” once again, we need policies that facilitate wealth creation, so all Americans can benefit from the increased opportunities that come about when the overall wealth of the nation increases. A lower tax burden can only mean more economic freedom and more individual liberty for all.
History—real history, not the fake history of the Left—has proven repeatedly that guaranteeing equal outcomes to everybody—instead of guaranteeing the right to the “pursuit of happiness” as the American Declaration of Independence does—means compensating idle people nearly the same as hard-working people, which, in turn, incentivizes people to stop working, as long as it means being paid so well to be idle. Thus, economic activity—and the tax money generated by it—is reduced, as government increases its welfare payments. That was Obama’s socialist recipe. But Americans have had enough socialism! Now it is time to unshackle American exceptionalism again, unleashing America’s economic engine by rewarding hard work, innovation, and risk-taking, which is the American way! And Trump’s tax-cut plan is the recipe that America needs.
The views expressed in this opinion article are solely those of their author and are not necessarily either shared or endorsed by EagleRising.com