On April 26, 2017, after months of speculation, the Trump administration released an exhaustive and airtight one page plan to pull off “The Biggest Individual And Business Tax Cut In American History.” As I, a leftist shill, a whiny millennial snowflake, stare at this single PDF page, I realize any attempts to criticize such a plan will ultimately prove fruitless. The statist leviathan of taxation has already been dealt its death blow by these 19 bullet points and who am I to suggest otherwise? All hail, God Emperor Trump!
But try I must! Some may look at this document, see that it says one goal for tax reform is to “[g]row the economy and create millions of jobs” and do the right thing: say that’s enough proof for them that it will be tremendous, that I can tell you. Unfortunately, I came into this world defective and misshapen, cursed with an amoral and sinful drive to always question and wonder: what if it’s not so tremendous? If you, like me, are burdened with this affliction, let’s make the most of it together. Let’s talk about this tax plan and (if blasphemy offends you, stop reading here) why it won’t make America great again.
Okay, I think we’ve gotten rid of all the MAGA-hat wearers and diehard Trumpists. I know you’re busy and, regardless, who the hell wants to read about taxes in their free time? You can already find plenty of material on the Internet going line by line through this one-page proposal.
Think of this article in the same vein as reading the first few pages of a book on Amazon. You can decide whether you want to read the whole thing and all the spinoffs later. This is just to get what you started. Tax policy is a lot to get your head around so we’re just gonna focus on the title and the first bullet point. See, that’s not so bad. The way I see it, if the first chapter of a book is really bad, the rest can’t be much better. Just three questions. Is this the biggest tax cut in history? Will it for sure grow our economy? And will it for sure create millions of jobs?
Is this the biggest tax cut in history?
Only in Trump’s head, but it’s unsurprising the hand-and-inauguration-crowd-size-obsessed man who bragged about the length of his penis during a presidential debate would psychologically need it to be the biggest. It’s predicted to have the biggest dollar amount attached to a tax cut in American history but, of course, the president must know inflation renders this a bad gauge for whether it’s the actual biggest comparatively. Well, maybe not this president, come to think of it.
One way to more accurately compare past tax cuts to Trump’s current proposal is by looking at how much any given tax cut cost in terms of the federal GDP at the time. Why is this better? Well, a share of GDP is a share of GDP, no matter how big or small the share or the GDP is. 10% of $100 is going to come out to a smaller dollar amount than 10% of $1000 but it’s still 10% of the whole pie. The biggest dollar amount means less if the pie itself is way bigger too, which is exactly the case for Trump right now.
The Committee for a Responsible Federal Budget applied this more accurate metric and they discovered Truman and Reagan both outdid Trump on this front. And Truman’s tax cut for the richest was, I kid you not, from 94% to 86.45%.
Will it for sure grow the economy?
Sometimes tax cuts help the economy and sometimes they don’t. But they mostly don’t. That isn’t something I heard from Bernie Sanders, read on Jacobin or was paid by George Soros to say. It’s something Business Insider and Fortune would tell you too.
More importantly, it’s something nearly 70 years of hard-and-fast economic data says pretty definitively. The Congressional Research Service—a nonpartisan policy analysis branch of the Library of Congress—published a report to this effect in 2012 that you can read here. But just in case you don’t want to read the whole thing, here’s a link to a graph representing the data detailed and an excerpt from its closing remarks:
The top statutory income tax rates have changed considerably since the end of World War II. Throughout the late-1940s and 1950s, the top marginal tax rate was typically above 90%; today it is 35%. Additionally, the top capital gains tax rate was 25% in the 1950s and 1960s, 35% in the 1970s; today it is 15%. Statutory tax rates affecting taxpayers at the top of the income distribution are currently at their lowest levels since the end of the second World War. . .
. . . The results of the analysis in this report suggest that changes over the past 65 years in the top marginal tax rate and the top capital gains tax rate do not appear correlated with economic growth. The reduction in the top statutory tax rates appears to be uncorrelated with saving, investment, and productivity growth. The top tax rates appear to have little or no relation to the size of the economic pie. But as a small proportion of taxpayers are affected by changes in the top statutory tax rates, this finding is not unexpected.
Will it for sure create millions of jobs?
This seems like a bit of a tall order too. For perspective, Ronald Reagan inherited an economy from Jimmy Carter that Baby Boomers still complain about to this day (citation: at least, my parents do, and I don’t blame them). So, in August 1981, Reagan passed the actual biggest tax cuts in history. And the unemployment rate continually climbed until, by the end of 1982, it was at its worst point since the Great Depression. This rate (10.8%) still hasn’t been surpassed—the highest it got during the Great Recession was 10%.
Does this mean Reagan’s tax cuts led directly to this downturn? No. But it does mean tax cuts don’t function as spells you can cast to magically add jobs to the economy. For what it’s worth, Reagan signed off on a tax increase in 1982 that one of his advisors, Bruce Bartlett, said was “probably the largest peacetime tax increase in American history.” He continued to increase at least some tax rates every year from 1985-1988. Employment was better all those years than it was under his initial Biggest Tax Cut Ever.
From 1951 to 1963, the richest were required to fork over 91-92% of their income. That’s right. In Lucille Ball and Andy Griffith’s America, the wealthy were forking over more than nine-tenths of their income and unemployment never went over 7.5%. Even after Reagan slashed the highest income tax down to 28% by 1986, he only managed to get his own unemployment rate down to 5.4%. Kennedy kept his hovering around there for most of his presidency and Eisenhower got his down to 3.4% while basically taking the wealthy for all they were worth.
The Biggest Conclusion to an Article About Tax Cuts in American History
Economies are complex creatures so we’d all be better off if everyone stopped acting like they had a magic wand to make things way better. Low taxes don’t necessitate a booming economy and high taxes don’t necessitate a stifled one; deregulation isn’t an instantaneous recipe for success and neither is government stimulus spending. Based on this single page “plan,” it looks like Trump is expecting his tax cuts to operate as just that kind of magic wand.