Democrats vow to repeal tax reform, putting taxes in focus for 2020
Former Vice President Joe Biden made it clear: “First thing I’d do is repeal those Trump tax cuts.” Sen. Kamala Harris (D-Calif.) seconded the motion, saying she would repeal the tax cuts on “day one.” Mayor Bill de Blasio has attempted to raise taxes on high earners in New York City.
Democrats seem eager to prove that they still have no idea how jobs and wage increases are created in a capitalist economy — that is, by capital investment that starts new businesses or expands existing ones, increasing the demand for labor as jobs are created, bidding up wages.
But stimulating capital investment requires incentives that arise from reducing tax rates. That is what President Trump and Republicans in Congress did in their Tax Cuts and Jobs Act of 2017.
Was it good for America and its workers for the federal government to impose the highest marginal corporate tax rates in the industrialized world? Before Trump’s tax reform, those tax rates were nearly 40 percent, counting federal rate and state corporate rates, on average. Most of the rest of the world imposed marginal tax rates only half as high on their businesses.
Tax reform reduced the rate on businesses to the world average and ended double taxation on earnings of U.S. corporations abroad. That is why the U.S. economy has created millions of jobs with Trump in the Oval Office. The Democrats’ ball and chain on American business has been sharply cut back, creating a capital investment boom.
America now enjoys the lowest unemployment rate in 50 years, with more job openings than there are workers available. Unemployment has dropped to its lowest level in history for African Americans, Hispanics and Asian Americans, as well as among women and teens. All that investment and labor demand has wages rising faster than inflation for the first time in decades, more among the poorest workers than among the top 1 percent.
But Biden says, if he is elected, he will repeal the tax reform bill “in the name of fairness” to make sure all those capital investors who risk their own money to create jobs pay their “fair share.” Harris would do the same. Ditto that for Sens. Amy Klobuchar (D-Minn.) and Elizabeth Warren (D-Mass.), Mayor Pete Buttigieg of South Bend, Ind., and the rest of the pack of Democrats running for president.
But what is fair about that for those who would lose their jobs and the wage increases they won under President Trump? That’s why the democratic socialists will lose working people and their families in a great realignment similar to 1984. It is happening not just in America but around the world, from Australia to Brazil, to Europe, to India, even to Canada, as parties of the left are losing their former base among the working class to parties of the center-right.
And contrary to Democratic disinformation, President Trump’s tax reform included tax cuts for the middle class of about $2,000 a year per family; rates for families making $19,000 to $77,000 were cut by 20 percent. The same occurred for single taxpayers making $9,500 to $38,700. Tax reform also nearly doubled the standard deduction, and actually doubled the child tax credit — both of which benefit lower-income workers the most.
Amazingly, these tax benefits have been confirmed by the New York Times and the Washington Post, which have acknowledged that most Americans received a tax cut. H&R Block concluded that “overall tax liability is down 24.9 percent, on average.” So much for the socialist derision of tax reform.
Raising taxes would only consign America’s working people back to renewed recession, as under Biden and President Obama. Democrats seem to want to run as they did in 1984, when Walter Mondale campaigned on a tax-increase platform. Then recession occurred when President Bush agreed to raise taxes in a 1989 budget deal, which only increased the deficit.
Lewis K. Uhler is founder and chairman of the National Tax Limitation Committee and National Tax Limitation Foundation (NTLF). He was a contemporary and collaborator with both Ronald Reagan and Milton Friedman in California and across the country.
Peter Ferrara is the Dunn Liberty Fellow in economics at The King’s College in New York, and a senior policy advisor to NTLF. He served on the White House Domestic Policy Council under President Reagan and as associate deputy U.S. attorney general under Attorney General William Barr and President George H.W. Bush.