Judy McGinnis: Our kids will pay for tax cuts
September 25, 2017
Jennifer Schubert-Akin's recent op-ed makes a case for "tax cuts for all Americans." Her first reason is the Republican majority's failure to enact "popular and much needed" legislation could result in voters throwing them out.
She notes median Colorado wage, $19 per hour, leaves many living paycheck to paycheck, and a tax cut puts more money in their pockets. She says small business "pay(s) 40 percent of their marginal earnings in federal taxes." Finally, tax cuts stimulate the economy and "offset their fiscal cost and overcome concerns that they would add to the federal deficit."
Tax cuts are not "popular and much needed." A recent Wall Street Journal/NBC poll can be summarized: “Increase taxes on corporations and the wealthy, but not on me, also decrease tax on small Business. So, broad tax cuts aren't popular.”
Ms. Schubert-Akin justifies tax cuts as spurring growth. Most economists disagree. She cites Reagan tax cuts as evidence. Facts don't support that claim, either.
Annual job growth during Reagan's eight years was lower than the eight years Clinton was president, when taxes were actually raised. Even during the Carter presidency, annual job growth was greater than during Reagan's. Further, tax revenue as a percent of GDP dropped significantly between 1980 and 1988, resulting in massive increase to federal debt.
Some Senators, working on tax cuts, are willing to increase the deficit by $1.5 trillion. To give a tax cut to us today, our children will be obligated to pay when debt comes due. Do we want to saddle them with more debt?
Recommended Stories For You
No doubt the median Coloradan she mentions, making $19 per hour, benefits from a tax cut. But that same Coloradan will be the certain loser when federal programs are cut, whether from slashed Medicaid or Forest Service cutbacks.
In 2014, a total of $44 billion in federal income tax was collected from all U.S. tax returns with income of less than $40,000. Taking the rate to 0 percent for those workers would result in a U.S. tax cut of about $50 to $60 billion today. That means that 95 percent of the $1.5 trillion tax cut will be going to people making more than the median Colorado income.
If Ms. Schubert-Akin suggested eliminating taxes for all making less than $40,000 and stopped there, I would say go ahead. Benefit to those workers would be great, with insignificant cost to to government. But, she endorses a massive tax cut to people making much more.
Specifically, she suggests cutting small business taxes, one popular group where a majority of Americans support tax cuts. Let's define "small business."
Ms. Schubert-Akin says small businesses pay 40 percent marginal federal tax rate. But only those making a profit of over $400,000 per year pay 40 percent. While a business with $400,000 profit could be small, that profit is large.
To be in the top 1 percent of Coloradans requires income of $410,000. The top federal income tax rate of 39.6 percent doesn't apply until you are above that level (single or married). So the small businesses that she wants tax cuts for are already in the top 1 percent of Colorado earners.
An American majority favors more taxes on the wealthy and less on small business. But is the small business owner who's in the top 1 percent deserving of tax cuts?
Increasing federal debt to give tax breaks to the wealthy is fiscally irresponsible and puts an unfair burden on the young people who someday have to pay back that debt. We don't need this giveaway.