The richest demographic in the U.S. right now is 55 and up. That’s why there would be more growth in Donald Trump’s “SENIORS SHOULD NOT PAY TAX ON SOCIAL SECURITY!” than in his vastly oversold 2017 Tax Cuts and Jobs Act.
Which is where it gets a little interesting. A recent editorial indicated that Trump has lost the tax cut plot given his push to zero out taxes on Social Security, and it’s rooted in the view that Social Security tax cuts would come at the cost of extending the Tax Cuts and Jobs Act. Forget that tax cuts could never be a “cost” as is, but supposedly the Tax Cuts and Jobs Act “was the policy foundation for the strong pre-pandemic U.S. economy.” Which is hard to take seriously, and that’s not an argument against tax cuts.
It’s instead an argument in favor of tax cuts that actually power the savings and investment without which there’s no growth. The 2017 tax cuts were not about economic growth, and the source of that truth can be found in commentary from Phil Gramm, Steve Moore, former Rep. Paul Ryan, and others on the right: they all noted that the 2017 Trump tax cuts did not reduce the tax burden on the rich.
The editorial decrying Trump’s pivot to zeroing out taxes on Social Security indicated that “not all tax cuts have equal benefit.” It’s so true, and that’s why there’s little value in an extension of the 2017 Tax Cuts and Jobs Act. It was a Keynesian tax plan by the implicit admission of Gramm et al. That which is geared toward largely reducing the tax burden on low and middle earners has little to do with growth simply because low and middle earners will, based on being low and middle earners, most likely spend the money saved in taxes.
Good for the low and middle earners, let’s reduce taxes on everyone, but the genius of supply side economics is that it’s not about consumption that never needs to be stimulated, and instead it’s all about the production without which there is no consumption. Which is a reminder that supply-side tax cuts are that way not when they reduce the tax burden on everyone (laudatory as such a scenario might be), but most crucially when they reduce the burden on those with the most.
Booming growth is found in shrinking taxes on the rich since they’ve got the greatest capacity to save and invest. It’s when saving and investment increase that producers enjoy greater access to the capital necessary to expand investment, and with greater investment, more production. In which case it’s useful to point out that since 55-and-up is a rather well-to-do wealth cohort in the U.S., zeroing out Social Security taxes will enhance savings and investment more than tax cuts geared to low and middle earners.
Right-leaning editorialists and pundits continue to make the odd case that “pro-growth tax policy” from Trump exists as his “major advantage” over Kamala Harris, except that there was once again little that was pro-growth about the 2017 tax cuts. Tax bills that raise taxes on the rich by definition lay a wet blanket on economic progress by increasing the burden on those most capable of saving and investing. As for the corporate tax cuts in the bill, a lower headline rate was exchanged for exposing trillions in foreign earnings to Uncle Sam.
As always with taxes, the goal should be less revenue for the federal government, not tax increases “here” to “pay” for tax cuts there. Our job isn’t to support Treasury. At the same time, and if growth is the goal, that can only be found in a reduced burden on those with means. Meaning, Trump’s assertion that “SENIORS SHOULD NOT PAY TAX ON SOCIAL SECURITY!” is more pro-growth than the 2017 Keynesian cuts foisted on him by Paul Ryan.
Republished from RealClear Markets