Taxes

Who Knew Letting People Keep More of Their Money Leads to Good Things?

Anyone who studies economics instead of partisan talking points, for one.

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Jesse Wagstaff/flickr

In the six weeks since the passage of the tax law, dozens of companies have announced bonuses and wage hikes, some of them just hours after the bill was passed.

Although the bill has not yet gone into effect, there been other tangible benefits to a lower tax burden—some gas and electric companies, for example, have decided to pass on their tax savings via lower rates for customers.

None of this should've been unexpected. Nearly 140 economists, urging Congress in November to pass the tax reform bill, predicted more jobs, higher wages, and a better standard of living for Americans, largely because of a lower corporate tax rate, which they explained would spur investment, business formation, and productivity.

Shikha Dalmia wrote positively about the tax bill back in April. She predicted it would spur the kind of growth we're starting to see signs of, and also noted that that growth could have the effect of undercutting Trump's ethno-nationalist agenda.

There's also evidence that historically lower tax rates in the U.S. overall lead to higher economic growth.

Perhaps Peter Suderman put it best: the tax bill was in no way perfect, but not the end of the world its critics predicted. Instead, it was a "predictable, conventional piece of Republican tax legislation," with predictable drawbacks (primarily a deficit increase) and benefits, some of which are starting to be seen.

Before the new law, the U.S. had one of the highest corporate tax rates in the world, leading many companies to move some operations overseas to lower their burden. Studies suggested the rate was so high it was actually reducing productivity so much as to lead to decreased revenue.

In the run-up to last month's vote on the Republican tax bill, critics poo-pooed the intuitive idea that if companies pay less in taxes, some of that will make its way back to workers. Democrats in Congress were even worse, deploying apocalyptic rhetoric about the bill.

The Center for American Progress' Igor Volsky, meanwhile, sounded downright ecstatic that Walmart announced layoffs.

Volsky's characterization of what happened is misleading. Walmart is reportedly closing dozens of its underperforming Sam's Club locations after years of expansions. Walmart, meanwhile, announced it was raising its starting wage to $11 an hour, handing out bonuses to eligible employees, and looking for other ways to re-invest their tax savings.

For his part, Ryan's prediction was about what a "majority of companies" would do, as Volsky himself described it, not every single one. A lower tax burden makes it easier to do business but it's hardly a cure-all. Most advocates avoided that kind of exaggeration.

Companies' decisions to give employees bonuses or raise wages are headline-grabbers, and in the coming months and years there ought to be evidence other good things happening, too. And all because individuals the companies who employs them can keep more of their own money.

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31 responses to “Who Knew Letting People Keep More of Their Money Leads to Good Things?

  1. all because individuals the companies who employs them can keep more of their own money.

    Welch wouldn’t have stood for this malarkay.

    1. ……………I just started 7 weeks ago and I’ve gotten 2 check for a total of $2,000…this is the best decision I made in a long time! “Thank you for giving me this extraordinary opportunity to make extra money from home.
      go to this site for more details….. http://www.startonlinejob.com

      1. 3 in a row, whee! Seriously, I hope they never crack down on spam here, because these serendipitous juxtapositions from comments we suspect are generated by bots are fun when they pop up like this.

  2. You left out:
    “Stocks hold higher after Dow tops 26,000 for first time”
    https://www.msn.com
    /en-us/money/markets/dow
    /ar-AAuL1E8?OCID=ansmsnnews11

    And you could have mentioned that Volsky must have a second job picking cherries.

  3. Aren’t we supposed to be decrying this for the deficits that result in letting people keep more of their money?

    1. Only if the congressional GOP forgets that “letting people keep more of their money” doesn’t include defense contractors as “people” and they go through with their demands to up defense spending.

      If you’re cutting revenue, it’s wise to cut expenditures as well.

    2. So how much should we really care about deficits? If they are financed through voluntarily lent funds, perhaps not so much. I mean, other than the fact that sooner or later, the government is either gonna tax us to pay for them, or devalue the currency. If they are financed by inflation, that is just a hidden tax that kicks in a few years down the line. Either way, because this tax cut was not tied to spending cuts, all this means is we are taking a rain check on paying these taxes, plus interest. In other words, this tax cut is just a cash advance from your credit card company. Hooray! MAGA!

      1. Put differently, this tax cut is just Keynesian deficit spending to stimulate the economy, but in drag.

        1. Not really. It’s getting rid of a lot of dead-weight loss. The debt is going to be monetized one way or another. Might as well stop destroying wealth in the process.

      2. Look on the bright side, you could die before the company comes to collect.

        1. Yep. Let’s just fuck over those lazy millenials.

  4. I’m surprised Reason still has people to write articles like this. Aren’t we all supposed to be dead after the tax bill was signed, cracking each others’ heads open and feasting on the goo inside?

    1. It’s okay, you’re only going to die if you’re not white. After all, Trump has an ethno-nationalist agenda. I read it right here on Reason, and not some silly conspiracy site.

  5. She predicted it would spur the kind of growth we’re starting to see signs of

    Yea…

    and also noted that that growth could have the effect of undercutting Trump’s ethno-nationalist agenda.

    **Facepalm**

    There’s also evidence that historically lower tax rates in the U.S. overall lead to higher economic growth.

    People have more of their own money to spend and prices aren’t artificially quite as high with a lower corporate tax rate.

    1. Dalmia is conflicted.

    2. Drumpf campaigned on an anti-immigrant, and specifically anti-Mexican-immigrant, platform. “Ethno-nationalist agenda” is a perfectly accurate description. Any doubt about Drumpf’s white supremacist ideology should finally have been put to rest by his “shithole” comment.

      1. Drumpf

        I didn’t know we were still sing not-his-name and certainly not a name he changed from, himself.

        anti-immigrant, and specifically anti-Mexican-immigrant, platform

        I think you mean anti-“illegal” imigration, and he basically ran on enforcing things that are already law. (Law enforcement is what the president does…) The US borders Mexico and Mexico is kind-of a shithole. Because Mexico is kind-of a shithole, lot’s of people want to leave Mexico for greener pasture in the US. Along with the people who choose to follow US law in the manner of immigrating to the US (bc Mexico is kind-of a shithole), there are many others that choose to break US law by entering the country in a manner not consistent with US law. You can disagree with the law, but Donald only ran on enforcing existing law.

        Any doubt about Drumpf’s white supremacist ideology should finally have been put to rest by his “shithole” comment.

        Some places in the world are not nice or safe places to be. That is why people want to leave them. Most of these places are predominantly non-white (at least speaking to countries and not parts of countries, the US has shitholes as well, many if not most predominantly white). That is merely a fact and does not imply any kind of malicious racism. And certainly does not imply that Donald Trump, a man who’s been in the public eye for decades, is some sort of ethno-nationalist bigot.

  6. B-b-b-but….REVENUES!

    It takes a special kind of ignoramus to argue against people keeping more of their money.

    I’m surprised the commie didn’t link tax cuts to being against the interest of people.

    We never really saw Obama’s policies (can someone explain to me what they were besides shovel ready infrastructure schemes, subsidies for green energy and onerous red tape imposed on companies etc.?) convert into anything meaningful really.

    What were the tax rates under Obama? Steady? Did they increase?

    1. “”It takes a special kind of ignoramus to argue against people keeping more of their money.””

      Or CNN

      but perhaps that’s redundant

  7. IF IT WEREN’T FOR THIS EVIL TAX CUT, WALMART WOULD HAVE KEPT OPEN ALL THOSE UNDERPERFORMING STORES THEY ARE NOW CLOSING!!!

    /Volsky

    1. My thought was similar. These people who got laid off from Wal-mart would be so much better off if we’d left the taxes in place, taxed them more, and made it harder for employers to (re)hire them.

      1. Same sort of mindset who would freak out if in fact climate change won’t destroy the earth. You’d figure they’d be happy but since it goes against the narrative….nope.

  8. Volsky can barely conceal his boner over the thought of Walmart laying people off.

  9. Sure letting people keep more of their own money leads to good things, but it leads to even better things if the wise confiscate the money of the stupid and take charge of spending it. If you kept your own money, you’d just spend it on food or something whereas if Uncle Sam had it he would distribute it in a more socially beneficial manner. Like providing paychecks for people hired to distribute your money in a more socially beneficial manner. Your way, you provide more low-pay jobs for retail workers, the government’s way they provide more high-pay jobs for government bureaucrats. And we know who’s wise and who’s stupid because just look at who gets to decide who confiscates who’s money. If you were smart, you’d be in charge.

    1. Your way, you provide more low-pay jobs for retail workers, the government’s way they provide more high-pay jobs for government bureaucrats.

      Not to belabor the obvious, but high-pay jobs are better than low-pay jobs. So there’s that, too.

  10. The other beef about the business tax cut was that a lot of it was going to go to shareholders, conveniently omitting the bit of information that among the largest shareholders are state pension funds, most of which have a ton of catching-up to do thanks to underfunding and overpromising by hacks of all persuasions.

    And if those pension funds aren’t kicking ass and taking names, it’s the poor slobs at the bottom of the pile who have to make up the difference.

    This went in one progressive hive-ear and out the other.

  11. Walmart raised their entry level wage from $7.25 to $9 in 2015 and again to $10 in 2016. Target raised theirs to $11 in 2017. The tax bill had nothing to do with Walmarts pay scale.

  12. How much longer before I’ll be tired of winning?

  13. Pelosi called it a give away to the corporations. A give away! God she’s evil.

  14. Why stop here? Only tax enough to pay interest on the debt, and borrow the rest. Lowest possible taxes.

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