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Letters to the Editor - December 30, 2017

Dear Sir,

In his letter to the editor last week, Jean-Claude Tatinclaux rails against the just-passed tax bill as benefiting the very rich, big business and then substantially increasing the deficit.

In doing so, he parrots what the leaders of the Democratic Party have been saying. This line of babble is patently dishonest and demonstrates a lack of understanding of basic economics.

The common tag line is that the rich don’t pay their fair share in taxes. In fact, the United States has the most progressive tax structure in the developed world. The top one percent pay more in taxes than the bottom 90 percent. Meanwhile, 44 percent of tax filers pay no federal income tax at all. In reality, about 95 percent of all tax payers will see their taxes go down under this bill. The exception is the very rich in high tax states such as California and New York. While they do get a marginal rate cut from 39.6  to 37 percent, they will now be limited to a maximum deduction for state and local taxes of US$10,000.  That means most, if not all of them, will pay a considerably higher amount in federal income taxes.

Another fallacy is that the poor will pay increased taxes under the new law. That’s based on the elimination of the penalty for not buying insurance under Obamacare. The twisted logic is that if someone is not forced to buy the insurance they won’t get the government subsidy and that constitutes a tax increase. That’s just plain moronic.

Another bogus claim is that ultimately 83 percent of the cuts go to the top one percent and nothing is being done for the middle class. In order to pass the bill under reconciliation, it was necessary to make part of the cuts temporary – expiring in 10 years. The bill does this with the individual cuts, while making the corporate cuts permanent. The 83 percent claim assumes the temporary cuts will be allowed to expire and this will be the end result. In fact, even if the Democrats are in control when expiration is approaching, they will be hard pressed not to continue the individual cuts – otherwise they will be the ones blamed for increasing taxes on the middle class.

The tax rate for corporations is being reduced from 35 percent to 21 percent and the argument is being made that greedy corporations will simply hoard the savings – giving raises to top executives and/or increase dividends to their wealthy shareholders. It’s interesting to note that the ink of the president’s signature is barely dry and numerous companies such as Wells Fargo, AT&T and Comcast are announcing US$1,000 bonuses for all U.S. employees and/or increases in their minimum wage to US$15/hr. – all due to the new tax law. Dividends may well be increased – and that will benefit the tens of millions of ordinary Americans who have 401Ks which invest in stocks.

The reduction in corporate tax rates, along with the Trump administrations drive to eliminate the excessive federal regulations, will enable U.S. -based companies to again be competitive in global markets. This means we will see enormous job growth in the United States. Given that we are at virtually full employment, that will mean upward pressure on salaries and wages which is long overdue and is perhaps the most significant thing the tax bill will do for ordinary Americans.

Finally, all this talk about the US$1.5 trillion increase in the deficit is not going to happen. In scoring the tax bill, the bean counters are using a static model. They assume the tax cuts will have no effect on economic output. But, if GDP increases just 0.4 percent the result will be enough increased tax revenue to compensate for the lowered tax rates. If you go back and look at the results when Kennedy, Reagan and Clinton cut taxes,  that is exactly what happened – tax revenues went up considerably.  And by the way, the GDP is already up one percent since Obama left office – just in anticipation of the tax cuts and other policies under Trump that reward, rather than punish those who are successful and create jobs.

Mike McSweeney, Ajijic

 

Dear Sir,

Reader Jean-Claude Tatinclaux writes to tell us how “upset and angry” he is over the recently passed tax reform law in the United States.  But really his angst is misplaced because it is based on his serial misunderstandings and fuzzy thinking.

Example:  Mr, Tatinclaux refers to taxpayers keeping a little more of their own money as a “windfall” and as “added gains.” But that would be true only if it were legitimate or even moral for the government to have first claim on the earnings and profits of its citizens.  That is one of the important distinctions between citizens and subjects.

Any change in tax policy that lightens the heavy hand of excessive government on the productive members of society is to be welcomed, and helps make life better for everyone.  JFK’s formulation of that principal remains one of the best: “A rising tide lifts all boats.”

And for the record, I did not vote for Mr. Trump, and probably would not if he runs again.  But he deserves credit when he does important work, such as excellent judicial appointments and efforts to reduce the involvement of government in the private affairs of free Americans.

John Robert Stevens, Vista del Lago, Chapala