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Welcome to Fairfax Underground, a project site designed to improve communication among residents of Fairfax County, VA. Feel free to post anything Northern Virginia residents would find interesting.
Beating Trump to the Payroll Tax Punch
Posted by:
The Different Drummer
()
Date: August 24, 2019 11:59AM
“We take Social Security for granted because it has been around for so many years, but it is literally life or death for millions of people.”
- Senator Bernie Sanders
The night will follow day. Winter will be relieved by spring. An economic boom will always give way to a downturn. Always.
It has been over a decade since Barack Obama helped guide the economy out of the "Great Recession" left by George W. Bush. During those ten years, the economy has added jobs for an unprecedented 103 months, spanning both the Obama and Trump presidencies. While the year over year growth in the GDP has not broken 3% during the entire recovery, under either Obama or Trump, the economy has managed to continue to grow at a slow but steady pace into “the longest economic expansion in American history.” Unfortunately, it seems that storm clouds are now on the horizon.
Historically, this would be the point in the economic cycle where a president’s economic advisors would start considering tax cuts in an effort to soften the landing, but Trump has already played this card. His poorly targeted tax plan that went into effect last year left a higher number of Americans owing the IRS money when they filed their tax returns this year, 60 Fortune 500 companies paying no federal income taxes at all and the federal budget deficit soaring. The second-quarter surge of 3.5% in GDP growth “represented the tax law’s peak impact.” With the end of the recovery in sight, “the economic benefits of the Tax Cuts and Jobs Act seem to have petered out.”
“The last quarter, it was just announced, our gross domestic product -- a sign of strength, right? But not for us. It was below zero. Whoever heard of this? It's never below zero.”
- “Businessman” Donald Trump in 2015
“Recession: a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters.”
- Oxford Dictionary
Publically, Trump and “his aides are saying there’s nothing to worry about,” but this outward confidence is betrayed by the fact that he has already started to scapegoat Democrats, the press and the Fed. Knowing that his reelection chances depend on a healthy economy, the Washington Post reported that “White House officials have been floating a payroll tax cut as a way to head off a possible economic slowdown.” The executive branch immediately denied that report saying that “cutting payroll taxes is not something under consideration at this time.” The next day, Trump himself contradicted that statement and said that he was “thinking about” cutting payroll taxes. A day later he reversed course again: “I’m not looking at a tax cut now...We don’t need it.”
By the time that the Trump administration finally digs itself out of the latest round of chaos, the economy may have already flatlined. Barring a sudden appearance by Obi Won Kanobi, the country’s only hope may be for the Congress to step in. If the progressive Democrats can get past Pelosi and offer their own package, this tax cut could actually help working-class Americans.
As it stands, the payroll tax is the most regressive of the federal taxes. Not only does every person pays the same exact rate, no matter what their income, but the income rate that is subject to the tax is also capped out at $132,900. This means that the 1% actually pay a lesser percentage of their income to support Social Security than everyone else. Furthermore, income made from investments is not subject to this tax.
To stimulate the economy, and to make the tax less regressive, the first portion of annual income equal to the poverty rate (currently $25,750 for a family of four in the contiguous 48 states) should be exempt from these taxes. To further increase the progressiveness of the tax, the cap should be lifted and capital gains should be included in the calculation. This would ensure that the trust fund continues to remain solvent.
Prior to the Trump tax cuts, American businesses were subject to “the highest corporate tax rate in the world.” However, after deductions were applied their effective rate was much lower. As a result, the “corporate share of federal tax revenue [had] dropped by two-thirds in 60 years — from 32% in 1952 [is this when America was ‘great’?] to 10% in 2013.”
Giving Republicans the benefit of the doubt, let’s assume that the artificially stated corporate tax rate was an impediment to job growth. We should, therefore, keep all of Trump’s corporate tax cuts intact. However, we should eliminate most deductions so that all profits are taxed at the published tax rate. A company like Amazon should not be able to rake in $11.2 billion in profits and pay nothing to the IRS.
The dead also need to start paying their fair share. In a move that exclusively benefited wealthy families, Trump’s tax cuts doubled the estate tax deduction to $11.2 million. This deduction should be reduced to $1,685,350, the average net worth of a family farm with annual sales of half a million dollars or more. Anything less helps to solidify the fact that “the United States exhibits wider disparities of wealth between rich and poor than any other major developed nation.”
Finally, the blue state penalty, which hurts those with high property and income taxes and is enshrined in the Trump tax cuts, needs to be eliminated. It is bad enough that taxpayers in these states are already subsidizing the red states which receive more in federal funding than they pay in taxes, all states should be treated equally in the tax code. While fixing this problem, an automatic cost of living adjustment should be cemented in the tax code so that calculations for deductions like the child tax credit are actually representative of where the taxpayer lives. This should also apply to other federal programs like food stamps and minimum wage calculations.
Our current expansion is already over three times “the average length of a growing economy [of] 38.7 months or 3.2 years.” At some point, we are going to enter a recession. The Trump administration has already proven itself either unwilling or unable to soften the landing when the economy crashes. Will the Democrats step up and use the opportunity to improve the economy going into the next period of growth?
________________________________
The article with complete annotations can be found at https://medium.com/@ChangeTheLAUSD/beating-trump-to-the-payroll-tax-punch-d7c883539faf?source=friends_link&sk=16e53fba0f597d9ca788cd065f011672
- Senator Bernie Sanders
The night will follow day. Winter will be relieved by spring. An economic boom will always give way to a downturn. Always.
It has been over a decade since Barack Obama helped guide the economy out of the "Great Recession" left by George W. Bush. During those ten years, the economy has added jobs for an unprecedented 103 months, spanning both the Obama and Trump presidencies. While the year over year growth in the GDP has not broken 3% during the entire recovery, under either Obama or Trump, the economy has managed to continue to grow at a slow but steady pace into “the longest economic expansion in American history.” Unfortunately, it seems that storm clouds are now on the horizon.
Historically, this would be the point in the economic cycle where a president’s economic advisors would start considering tax cuts in an effort to soften the landing, but Trump has already played this card. His poorly targeted tax plan that went into effect last year left a higher number of Americans owing the IRS money when they filed their tax returns this year, 60 Fortune 500 companies paying no federal income taxes at all and the federal budget deficit soaring. The second-quarter surge of 3.5% in GDP growth “represented the tax law’s peak impact.” With the end of the recovery in sight, “the economic benefits of the Tax Cuts and Jobs Act seem to have petered out.”
“The last quarter, it was just announced, our gross domestic product -- a sign of strength, right? But not for us. It was below zero. Whoever heard of this? It's never below zero.”
- “Businessman” Donald Trump in 2015
“Recession: a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters.”
- Oxford Dictionary
Publically, Trump and “his aides are saying there’s nothing to worry about,” but this outward confidence is betrayed by the fact that he has already started to scapegoat Democrats, the press and the Fed. Knowing that his reelection chances depend on a healthy economy, the Washington Post reported that “White House officials have been floating a payroll tax cut as a way to head off a possible economic slowdown.” The executive branch immediately denied that report saying that “cutting payroll taxes is not something under consideration at this time.” The next day, Trump himself contradicted that statement and said that he was “thinking about” cutting payroll taxes. A day later he reversed course again: “I’m not looking at a tax cut now...We don’t need it.”
By the time that the Trump administration finally digs itself out of the latest round of chaos, the economy may have already flatlined. Barring a sudden appearance by Obi Won Kanobi, the country’s only hope may be for the Congress to step in. If the progressive Democrats can get past Pelosi and offer their own package, this tax cut could actually help working-class Americans.
As it stands, the payroll tax is the most regressive of the federal taxes. Not only does every person pays the same exact rate, no matter what their income, but the income rate that is subject to the tax is also capped out at $132,900. This means that the 1% actually pay a lesser percentage of their income to support Social Security than everyone else. Furthermore, income made from investments is not subject to this tax.
To stimulate the economy, and to make the tax less regressive, the first portion of annual income equal to the poverty rate (currently $25,750 for a family of four in the contiguous 48 states) should be exempt from these taxes. To further increase the progressiveness of the tax, the cap should be lifted and capital gains should be included in the calculation. This would ensure that the trust fund continues to remain solvent.
Prior to the Trump tax cuts, American businesses were subject to “the highest corporate tax rate in the world.” However, after deductions were applied their effective rate was much lower. As a result, the “corporate share of federal tax revenue [had] dropped by two-thirds in 60 years — from 32% in 1952 [is this when America was ‘great’?] to 10% in 2013.”
Giving Republicans the benefit of the doubt, let’s assume that the artificially stated corporate tax rate was an impediment to job growth. We should, therefore, keep all of Trump’s corporate tax cuts intact. However, we should eliminate most deductions so that all profits are taxed at the published tax rate. A company like Amazon should not be able to rake in $11.2 billion in profits and pay nothing to the IRS.
The dead also need to start paying their fair share. In a move that exclusively benefited wealthy families, Trump’s tax cuts doubled the estate tax deduction to $11.2 million. This deduction should be reduced to $1,685,350, the average net worth of a family farm with annual sales of half a million dollars or more. Anything less helps to solidify the fact that “the United States exhibits wider disparities of wealth between rich and poor than any other major developed nation.”
Finally, the blue state penalty, which hurts those with high property and income taxes and is enshrined in the Trump tax cuts, needs to be eliminated. It is bad enough that taxpayers in these states are already subsidizing the red states which receive more in federal funding than they pay in taxes, all states should be treated equally in the tax code. While fixing this problem, an automatic cost of living adjustment should be cemented in the tax code so that calculations for deductions like the child tax credit are actually representative of where the taxpayer lives. This should also apply to other federal programs like food stamps and minimum wage calculations.
Our current expansion is already over three times “the average length of a growing economy [of] 38.7 months or 3.2 years.” At some point, we are going to enter a recession. The Trump administration has already proven itself either unwilling or unable to soften the landing when the economy crashes. Will the Democrats step up and use the opportunity to improve the economy going into the next period of growth?
________________________________
The article with complete annotations can be found at https://medium.com/@ChangeTheLAUSD/beating-trump-to-the-payroll-tax-punch-d7c883539faf?source=friends_link&sk=16e53fba0f597d9ca788cd065f011672