Midterm promises: Dems want to raise taxes, GOP to cut them

Midterm promises: Dems want to raise taxes, GOP to cut them
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Most people do not realize that the Democrats are running for Congress this year on a pledge to raise taxes, on you and your employer. In sharp contrast, Republicans promise to make the tax cuts they already passed permanent.

Democrats argue that the tax reform/tax cuts are a corporate giveaway, and that the December 2017 law cut taxes only for the rich. But the tax reform, as passed — over the opposition of every single Democrat in Congress — expressly includes tax cuts for the middle class, working people and the poor, reducing taxes, on average, for all taxpayers by more than $2,000 a year.

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Tax reform nearly doubled the standard exemption for all taxpayers, making tax-free the first $12,000 for singles, the first $18,000 for heads of household, and the first $24,000 for married couples. It also doubled the child tax credit from $1,000 to $2,000, benefitting especially the lowest-income families.

 

Tax reform then cut the income tax rate for middle-class singles earning the next $9,525 to $38,700 by 20 percent, lowering it from 15 percent to 12 percent. It cut the rate for middle-class singles earning between $38,700 and $82,500 by 12 percent, lowering the rate from 25 percent to 22 percent.

For middle-class families earning the next $19,050 to $77,400, tax reform cut the income tax rate by 20 percent, lowering it from 15 percent to 12 percent. Similarly, for middle-class families earning $77,400 to $165,000, tax reform cut the rate by 12 percent, lowering the rate from 25 percent to 22 percent.

Because no Democrat would vote for these tax cuts to pass over a filibuster, tax cuts for all individual taxpayers were made temporary, set to expire after eight years, to fit into the budgetary window that is exempt from filibuster. These are the tax cuts Republicans are pledging to make permanent, already introducing legislation to do precisely that.

Democrats cannot understand that cutting corporate tax rates benefits working people and the middle class; economic studies show workers bear 70 percent to 90 percent of corporate taxes (including the tax burden on smaller, “pass-through” businesses) in terms of lost wages and jobs. This is why countries around the world have been cutting their corporate tax rates for two to three decades, down to 18.9 percent on average in Europe and 20.1 percent in Asia. That is half the uncompetitive, disabling 40 percent or more that American businesses paid when President TrumpDonald John TrumpTrump rallies in Nevada amid Supreme Court flurry: 'We're gonna get Brett' Trump: 'Good news' that Obama is campaigning again Trump boosts Heller, hammers 'Wacky Jacky' opponent in Nevada MORE entered office.

When America tries to do the same for its workers, to keep up with the global competition, Democrat demagogues call it “a corporate giveaway.” Trump’s tax reform cut the federal corporate income tax rate from 35 percent to 21 percent, to make American business globally competitive again.

Economists estimate workers will get wage increases averaging $4,000 a year as a result of this tax reform, which we are seeing already in the marketplace, in addition to the $2,000 a year direct income tax rate cuts outlined above. We also already are seeing billions of dollars in increased capital investment, which is the foundation for new jobs and increased wages.

Democrats don’t know their history in complaining that these tax cuts will increase the deficit. President Kennedy’s tax cuts reduced rates for all taxpayers by about 23 percent, and federal revenues soared throughout the 1960s because of the resulting growth boom.

But today’s Democrats are not Kennedy Democrats. They will take America back to the long-term stagnation of President Obama’s tenure, when 2 percent annual economic growth threatened to put America on the road toward eventually becoming a Third World country.

President Reagan cut tax rates by 25 percent for all taxpayers, and federal revenues doubled while he was president, and the economic boom lasted 25 years. The economy grew by over 4 percent while Reagan was president, restoring America’s traditional world-leading growth.

Republican Tax Reform 2.0 would increase revenues, following history, by cutting capital gains tax rates. It should also make “expensing” permanent, which is an immediate deduction for the capital investment that creates jobs, and rising wages through increased productivity resulting from more advanced equipment. It should also completely abolish the death tax and the alternative minimum tax, now increasingly taxing the middle class rather than the rich as originally intended.

Tax reform is working. Over 300,000 jobs were created last month alone, and labor force participation increased by 800,000. But the political far-left Democrats would increase taxes and take back the increased jobs, wages and economic growth, restoring Obama’s Third World-stagnation.

Lewis Uhler is founder and chairman of the National Tax Limitation Committee and National Tax Limitation Foundation (NTLF). He was a contemporary and collaborator with Ronald Reagan and economist Milton Friedman.  

Peter Ferrara, a senior fellow with the Heartland Institute and the NTLF, teaches economics at King’s College in New York. He served in the White House Office of Policy Development under President Reagan and was associate deputy U.S. attorney general under President George H.W. Bush.