The Carmel Pine Cone's second story of the week


Editorial: The tax cut mystery

Published: December 22, 2017

THE TRUMP tax bill is on its way to becoming law, which brings with it a conundrum that actually gets harder to solve the more you think about it.

We’re not talking about whether the new tax rates will increase take home pay for most working Americans — because they will.

Nor are we talking about whether the big cuts in corporate taxes will stimulate the economy — because they obviously will do that, as well.

We’re not even talking about the one policy unknown about the tax bill: Whether the tax cuts will increase the federal deficit, or whether the economy will grow so much that the deficit shrinks. The jury is still out on that one.

The really big mystery is why Democrats hate the Trump tax bill so vehemently. It’s not like they’ve always been against tax cuts — at least, they haven’t been until the last 20 years or so.

As commentator Stephen Moore pointed out in a recent column on the CNN website, no less a figure than President John Kennedy was a staunch advocate of tax cuts as a way to stimulate the economy, and many Democrats on Capitol Hill in the early 1960s agreed with him.

And as recently as 1986, when President Ronald Reagan called for sharp reductions in income tax rates to help the country recover from the economic doldrums of the 1970s, practically every Democrat on the Hill was on the same page — so much so that the final vote in the Senate on the 1986 Reagan tax bill was 97 in favor to just 3 against.

No such luck this time. When the Trump tax bill was headed for approval, House Minority Leader Nancy Pelosi practically predicted the end of the world, calling the bill a “con job,” “brazen theft,” “a moral obscenity” and “the worst bill ever presented to Congress.”

To understand her hyperventilated condemnations, you don’t need a Ph.D. in economics, and it’s even better not to ruminate too much. Instead, go back to the basics. Why are there taxes?

For most of us, the government’s purpose in taxing incomes and profits is to raise money for necessary public programs — everything from national defense, to police and the courts, to roads, schools and disease prevention. Seen this way, most people could easily extrapolate the idea that tax rates should be optimized to maximize government revenue, which not only requires that the rates not be too low, but also that they’re not so high as to reduce the tax base by discouraging work and productivity.

But this is not the way 21st century Democrats see taxes. To them, the purpose of taxation is to help achieve “social justice” by redistributing income and making it more difficult for anyone to get rich, regardless of the impact on the economy. And no less an authority on Democratic Party policy goals than President Barack Obama stated this explicitly when he was running for president in 2008, saying he would support an increase in tax rates even if it meant slowing the economy and reducing government revenues. And why would he support such a through-the-looking-glass idea? For “fairness,” he said during one of the presidential debates.

So, there you have it. The Democrats hate the Trump tax cuts not because they believe they won’t work, but because they’re afraid they will — that they’ll create so many jobs, add so much productivity and make the whole country so much richer that government receipts go up despite the lower tax rates. As that happens, the poor will become richer, but so will the rich. And to the Democrats of today, it isn’t “fair” for the poor to be better off unless the rich are brought down.

And that’s why they hate Trump’s tax bill with such a passion: Not because he’s wrong when he says it will create “so many jobs,” but because it just might do exactly what he says it will.