“Silly Season” is in full swing in Washington, D.C. This is the period immediately preceding a Presidential Election, a period during which excessive promises are made to voters on both sides. Mostly, promises are for tax cuts for the Middle Class (and sometimes for others). Sprinkle in some tax increases for people who aren’t you and those you aren’t supposed to like, and you have the Mulligan Stew of promises, most of which will remain unfulfilled.
Cutting taxes is difficult and complicated. For that matter, so is raising taxes. With the U.S. GDP (Gross Domestic Product) in excess of $27 Trillion, our economy contains too many intertwined moving parts for any politician to accurately assess the outcome of new tax proposals.
In a perfect world, tax policy would benefit the national economy and the vast majority of our citizens. Let’s get into the weeds with a few of today’s popular themes to see if any or all proposals qualify for my lofty standard.
- “Further tax cuts for everyone” is a current Trump proposal. This follow-up to the 2017 tax cuts would likely benefit nearly everyone, as well as the economy, and tax cuts generally raise government revenues.
- “No tax on tips” is a Trump original, which was immediately aped by team Harris. Expect a very small economic impact, but lots of goodwill.
- “No tax on overtime” is another Trump original. Once again, it has very little overall economic impact and is dripping in voter goodwill.
- “No tax on Social Security Benefits” is a recent addition to Trump's campaign. This would strain the already overstressed Social Security System, hastening its insolvency, but again generates goodwill.
- “Cut taxes for the Middle Class” is a Harris Campaign slogan. This repetitive promise never gets enacted but sounds good to voters.
- “Raise the Corporate Tax Rate to 28%” is another Harris proposal. This job-killing, budget-busting proposal is pure economic tripe.
- “Tax Deduction of $50,000 for starting a business” is another Harris proposal. Waiting until a new business is profitable to get a tax deduction does absolutely nothing (short-term, anyway) for our economy or the entrepreneur. Tantamount to vote buying, and not much else.
During “Silly Season,” it is critical to note that Presidents do not control the U.S. Tax Code. That is the purview of the Legislature, and quite literally requires an Act of Congress. No wonder so little actually gets done. The only economic proposals encompassing sound financial principles must entail massive spending cuts. I have yet to see or hear one such proposal this cycle. Unfortunately, the only place where Economics comes before Politics is in the dictionary.
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