First George W. Bush and now Donald Trump has used the term "tax relief" to mask their tax cuts slanted toward the wealthiest Americans. Tax relief infers that we are suffering under an onerous, confiscatory tax burden.
Compared to whom, pray tell?
This is ludicrous, a nice way of saying it’s an outright lie. Of thirty-five developed nations, only Mexico and Chile pay less overall taxes than we do as a percentage of GDP. Some northern European nations have tax rates almost double our own and are doing rather well competing in today’s free-market economy.
An equally ridiculous corollary to the overtaxed misinformation is the belief that tax cuts for the upper-income brackets will encourage more investment, grow the economy and create more jobs. This is equally ridiculous.
Wealthy investors are notoriously conservative and will invest only when they see a sure opportunity for increased dividends and capital growth. Increased consumption, the driving force behind any economic recovery, will only take off when low- to moderate-income people have more money in their pockets to spend on consumer goods. This is the group to be targeted by any tax reform legislation aimed at economic recovery, not the wealthiest one percent whose consumption is never inhibited by a shortage of income in the first place.
A review of U.S. economic performance indictors and tax policies over the past quarter century reveals little correlation between tax cuts, particularly for the higher-income groups, and economic growth. In 1990 President George H. W. Bush, in a statesman-like move that cost him the 1992 election, raised taxes to keep the budget afloat. He had previously promised, "Read my lips; no new taxes." But instead of an economic slowdown after the 1990 tax hike, the economy grew steadily over the next five years. In 1993, Bill Clinton raised the top marginal tax rates and our GDP grew even more as did the stock market. But George W. Bush’s 2003 "Tax Relief" Bill slanted heavily toward the upper-income taxpayers was followed by some of the slowest economic growth in decades. Then, in one of the dumbest decisions in presidential history, George W. actually cut taxes and declared war in the same year.
Most any analysis of tax data since the end of World War II will reveal that the top U.S. tax rates have little effect on economic growth one way or the other. Some of our strongest economic growth took place when the top marginal tax rate still hovered around ninety percent following World War II. Cutting the top marginal income tax and capital gains taxes serves mainly to widen the gap between the highest and lowest income brackets. And today we have the greatest income disparity in this country since the Great Depression.
President Obama’s record-setting $800 billion stimulus package resulted in bringing unemployment down from 10% to 5%, doubling the Dow Jones stock market index average and creating 14 million new private sector jobs. But he pretty much left the nation’s basic tax structure alone; only a tweak here and there.
Don’t believe any of this? Believe what Donald Trump is telling you about our being overtaxed? Most everyone has access to a computer; check it out.
George B. Reed Jr., who lives in Rossville, can be reached by email at firstname.lastname@example.org.