Ladies and gentlemen, start your engines. The great tax race of 2017, and most likely 2018 as well, is about to begin.
President Trump released his tax reform plan in September. According to the NCBA staff in Washington, D.C., the House version of a tax reform package is expected to hit the floor today. While it will take a while for all the many pages to be read and analyzed, the starting flag has flown. However, the debate over the House tax reform package, and later when the Senate takes it up, will likely be more akin to hand-to-hand combat than NASCAR.
That’s because every special interest in the country, and quite a few from across the globe, will be lining up to lobby their interests. Many of those groups will want a tax package that punishes the rich and rewards the poor and middle class. And make no mistake, the tax and spend crowd who will oppose any tax cuts will throw you and the beef business in general into that “rich” group.
However, that mischaracterization of beef producers is not what this blog is about. Nor is it about the death tax, although the death tax is a wonderful poster child for wrongheaded tax policy. That’s a topic for another time. Instead, this blog is about why punishing success via the tax code is a really bad idea.
Ernie Goss, an economist who holds the Jack A. McAlister Chair in Regional Economics in the Creighton University Heider College of Business, writes a blog he calls Economic Trends. In a recent blog, Goss says the latest income tax data show that the top 50% of income earners paid 97.3% of income taxes, with the bottom half of income earners paying only 2.7%. That’s according to information from the Tax Foundation.
I think we can assume that the top half of income earners includes a lot of people who by any measure would not be considered “rich.”
“Furthermore, the top 1% of income earners paid an individual income tax rate of 27.1%, which was more than seven times higher than that of the bottom 50% who paid an income tax rate of only 3.5%. Thus, a tax reform package that differentially supports low and middle income taxpayers would further distort a tax system that already punishes educational achievement, innovation and entrepreneurship, all of which lead to income growth.”
On top of this, Goss says the element of the President’s tax reform package garnering the most criticism from supposed defenders of low and middle income taxpayers is the elimination of the deduction for state and local income taxes. “Currently the benefits of this deduction go largely to high income earners, and it encourages state and local taxing units to raise taxes. Eliminating this deduction would cost taxpayers with incomes over $200,000 an average of $7,000, but an average of only $100 for taxpayers making less than $200,000.
“To bolster passage of his plan, Trump might channel Nobel prize winning economist Milton Friedman who said, “I am in favor of cutting taxes under any circumstances and for any excuse, for any reason, whenever it’s possible.”
So too, I strongly suspect, are many beef producers as well as any other small business owner who has worked, struggled and sacrificed to become successful. I don’t have any grand suggestions for how to fix the wrongheaded tax policies this country endures, but punishing success via the tax code is just plain wrong. Rewarding success, on the other hand, will generate more jobs, which will generate more tax income as more people make and spend more money.
Trump thinks so. Let’s hope that our representatives and senators do, too.