Republicans run the House, the Senate, and the White House. They should be making the case that tax reductions across the board will spur the economy — and they should be looking into serious governmental cuts in order to prevent blowing out the deficit. Instead, they’re now telling us that deficit spending is no serious problem, and they’re embracing the Democratic-lite politics of taxing the rich more to offset tax cuts for other brackets that pay far less in taxes.
There's a lot to like about the new Republican tax plan. But there's a fair bit to dislike as well.
The new House tax bill doesn’t just leave taxes in place for those who earn more than $500,000 and couples earning more than $1,000,000. It increases taxes by 6% on each dollar earned from $1,000,000 to $1,207,000 for single people and $1,200,000 to $1,614,000 for married couples. That’s designed to make up for the reduction in the lowest tax bracket to 12%. As Phil Kerpen points out, that means the “effective rate in the bubble is 45.6%.” Combine that with state taxes in places like California, and high-earning Americans will be paying up to 56% of those earned dollars to the government. Combine that with the lowering of the mortgage interest deduction and you’re talking about a dramatic increase on those who earn most.
Now, there’s no question that this will poll popularly in the general public — soaking the rich always does. But is it good economics? Of course not. Is it even good politics? Probably not, insofar as Democrats were always going to oppose the Republican plan and call it a giveaway for the rich thanks to the reductions in corporate tax rates. Republicans are negotiating against themselves, and they’re doing it on the basis of Left-wing talking points about how the rich owe the country more of their money, despite paying nearly all net taxes in the country.
Republicans would be better off making the argument. The argument goes something like this: it’s their money. Not the government’s. Not yours.
Beyond that, those with more expendable capital invest it in new products and services. Those products and services make life better for everyone. Steve Jobs can do more with his own capital than the guy at the bottom of the Apple food chain, who presumably needs the money more. Need-based economics may sound generous, but it’s actually counterproductive — it prevents precisely the investment that creates the job for the guy at the bottom of the Apple job chain.
But Republicans won’t make the argument, because they’ve gone “populist.” Which is to say, they now lie about how economics work in order to pander to broader audiences. That’s sad on a moral level and stupid on a political one, since Democrats can always out-pander Republicans.