Podcast: Play in new window | Download (4.2MB)
I have some questions. To start, why do we need any tax cut at all? I hear that unemployment is low and getting lower. I hear that corporate profits are high and getting higher. The stock market keeps reaching new all-time highs. The economy is chugging along at a quite respectable pace. Our President tells us that the economy has never done better than during his first year in office. So why do we need a tax cut to stimulate the economy?
Let me suppose that we do actually need that great tax cut. I don’t understand why we need it but can our politicians be wrong? Let’s assume that they cannot.
I hear that the great tax cut will create more good jobs, will boost production and improve productivity. There will be more for all of us. What’s more, all that stimulation will actually lead to more tax revenue. People will have more and will thus pay more. It’s magical. Taxes will go down and federal income will go up. If you are from the same planet as I am, paying more is a tax increase, not a great tax cut. Of course our problem is that we are not politicians and just don’t understand how economics work.
Let me take the middle ground. If the great tax cut actually happens and that is by no means certain, let’s assume that the feds will break even. Based on what I hear, that is as likely as having more income but not as likely as having less cash in the federal coffers. That likely means that the federal debt will continue to increase, programs and services for the most needy of us will keep declining and things like infrastructure maintenance and improvement will not happen. Most of what our politicians tell us we need will not be realized and we will have taken a rather significant risk of being worse off.
As one of those middle class citizens who are to be the winners from the great tax cut, it is making no sense to me. Listening to the politicians and media folks isn’t helping much either. I pay taxes and need to decide whether or not the bill I pay is worth the benefits I derive from my investment. If I pay less tax, I can reasonably expect to get fewer benefits and will also have to figure out where else I can get the services and benefits I don’t want to do without. The reality is that most government benefits are not ones I can buy at Amazon or Walmart. I will just have to do without or at least with less.
However the political pie is sliced, I can’t figure out how I will be better off as a result of the great tax cut. If I may be permitted to expand that to my fellow residents of the middle class, I am clueless about what benefits we will get from that great tax cut. I did hear that I might have a thousand dollars or so more to spend. OK, I can spend a thousand dollars as can most of my fellow middle-classers. My worry is what I will have to give up over time to have the dubious opportunity to spend an extra thousand dollars. I am hearing nothing about that. It’s sort of like being encouraged to give someone a thousand dollars and agreeing that we will find out later what we had to give up to do the spend.
I am concluding that the great tax cut will probably not be a net benefit for me or for most of us in the middle class. We will be some better off and some worse off. So why are our politicians pushing so hard for the great tax cut? It must promise major net benefit for someone. If not us then who?