If you ever attended a political rally, you quickly realized that politicians love to take stands on issues that those in attendance want to hear about. Woe to that politician who stands before a crowd and does otherwise.
If you are like many Americans, you question the fairness of our tax system and believe that the plight of our country is getting worse, not better. It is not surprising then that in the last presidential campaign, candidates on the Democratic side were in favor of tax increases on the wealthiest Americans, while candidates on the Republican side, including then-candidate Trump, were in favor of tax rate reductions, resulting in tax cuts for all Americans.
{mosads}In making their case for tax increases, Democrats argued that the wealthiest taxpayers had not been paying their fair share of taxes. Republicans, on the other hand, argued that tax cuts for all individuals combined with business tax cuts would stimulate the nation’s Gross Domestic Product (GDP) which would increase government revenues, reduce unemployment, and raise the economic standards of all Americans.
Unfortunately, tax cuts cost the government money. Like any other government expenditure, unless revenues are created, cuts in other programs are made, or both to offset the cost of the tax cuts, the size of our national debt, currently at just under $20 trillion, will grow.
Since the beginning of 2000, both Republican and Democratic administrations have enacted major and costly legislative actions. These initiatives have included the Bush tax cuts of 2001/2003, funding the wars in Iraq and Afghanistan, the Recovery and Reinvestment Act of 2009, and the Affordable Care Act (ACA). Merits of these actions aside, all of these laws significantly raised the national debt. Only one, the ACA, had revenue provisions; i.e., the 3.8 percent tax on investment income to partially offset ACA’s cost.
President Trump has already signed several Executive Orders to curb new and existing government regulations. Congress, meanwhile, is considering changes to existing healthcare laws as well as individual and corporate income tax cuts. With this agenda in mind, two questions need to be asked. Question 1: Are the personal and corporate tax cuts necessary? Question 2: Is there a more prudent way of improving our economy and possibly providing tax relief without busting out the national debt?
In answering the first question, consider that in August 1981 when the Reagan tax cuts became law, the unemployment rate was 7.4 percent and the inflation rate was 10.8 percent. When President George Bush signed his tax cut legislation in June, 2001, the unemployment rate was 4.5 percent and the inflation rate was 3.25 percent. In May 2017, unemployment stood at 4.3 percent; and inflation was 1.9 percent.
Following the enactment of Reagan’s tax cuts, both the inflation and unemployment rates declined. GDP did rise above 4 percent for several years, however, that growth ebbed by the end of Reagan’s second term. The Reagan tax cuts were also blamed by some for a portion of the 186 percent increase in the national debt during his term.
Following the enactment of the Bush tax cuts, inflation rates declined, however, the unemployment rate remained at or above 4.5 percent in all but four of the remaining months of his presidency. GDP growth initially improved, but then steadily declined during Bush’s second term. Bush’s tax cuts were similarly blamed for a portion of the 101 percent increase in the national debt during his term. Treasury Secretary Steven Mnuchin recently stated that the Trump tax cuts would be paid for with economic growth. Sorry, Mr. Secretary, but history suggests that you may be wrong.
Here is a more responsible course of action. Continue with regulatory reform. Pass corporate income tax reform including eliminating tax avoidance loopholes to level the playing field among corporations. Reform our health care laws in a way that does not leave millions without insurance. Simplify the tax code for individuals. After the passage of a reasonable period of time, evaluate the results of these actions. If the results show declining deficits, then and only then consider a modest reduction in the corporate income tax rate and a tax cut for only the neediest of taxpayers.
With the national debt where it is, we can ill afford to be giving more tax cuts like candy to the most affluent among us.
In the movie Jerry McGuire, one of the most memorable moments was football star Rod Tidwell’s (Cuba Gooding Jr.) recurring and defiant pleading to his agent Jerry McGuire (Tom Cruise) to “show me the money.” Before voting for any tax cuts, our political leaders should ask that very same question in regard to funding the cuts with the same fervor expressed by Tidwell. Now THAT is a political stand of which we all could be proud.
Robert Turkavage is a retired FBI Supervisory Special Agent, a 2014 Republican candidate for the U.S. Senate (N.J.), and a 2016 NJ delegate for John Kasich.
The views expressed by contributors are their own and not the views of The Hill.