David_42
Registered Democrat.
- Aug 9, 2015
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They never learn..
Jeb Bush’s tax plan shows Republicans can’t learn from economic history
Jeb Bush’s tax plan shows Republicans can’t learn from economic history
Jeb Bush released the first details of his tax plan today in a Wall Street Journal op-ed, so we finally learn the secret that will produce spectacular growth, great jobs for all who want them, and a new dawn of prosperity and happiness for all Americans. Are you ready?
It’s…tax cuts for the wealthy! If only we had known that this amazingly powerful tool was available to us all along!
To be fair, not everything in Bush’s tax plan is targeted at the rich — there are some goodies in there for other people as well. But it’s pretty clear that in addition to wanting to revive the Bush Doctrine in foreign affairs, Jeb is looking to his brother’s tax policies as a model for how we can make the economy hum, I suppose because they worked so well the first time.
While many of the details are still vague, here are the basics of what Bush wants to do. He would reduce the number of tax brackets from its current seven down to three, of 10 percent, 25 percent, and 28 percent. This would represent a huge tax cut for people at the top, who currently pay a marginal rate of 39.6 percent. He also wants to eliminate the inheritance tax and the alternative minimum tax (both paid almost entirely by wealthy people), and slash corporate taxes. On the other end, he’d raise the standard deduction and expand the Earned Income Tax Credit, which helps the working poor. He would also eliminate the carried interest loophole, which allows hedge fund managers to pay lower rates on their income.
“We will treat all noninvestment income the same,” he says, which is a reminder that investment income, which is mostly gained by wealthy people, would still be treated more favorably than wage income, which is what working people make.
As Dylan Matthews notes, Bush’s plan is something of a compromise between the supply-siders and flat-taxers who think that cutting taxes on the wealthy is literally the only thing necessary to spur the economy, and the “reform conservatives” who would give the wealthy some breaks but put more of their effort toward changes affecting the middle class. But the biggest problem with Bush’s plan may not so much the particulars, but the fact that he believes that making these changes will “unleash” the American economy.
We’ve had this debate again and again in recent years, and every time, events in the real world prove Republicans wrong, yet they never seem to change their tune. When Bill Clinton’s first budget passed in 1993 and raised taxes on the wealthy, Republicans said it would cause a “job-killing recession”; what ensued was a rather extraordinary economic boom and the first budget surpluses in decades. When George W. Bush cut taxes in 2001 and 2003, primarily for the wealthy, they said that not only would the economy rocket forward into hyperspace, but there would be little or no increase in the deficit because of all that increased economic activity. What actually happened was anemic growth and dramatically increased deficits, culminating in the economic catastrophe of 2008. When Barack Obama raised taxes, Republicans said the economy would grind to a halt; instead we’ve seen sustained job creation (despite weak income gains).
The lesson of all this, to any sane person, is that changing tax rates, particularly the top marginal income tax rate, has little or no effect on the economy. Yet Jeb Bush wants us to believe that his plan will produce sustained growth of 4 percent or more — something no president since Lyndon Johnson has managed — with what is essentially a rerun of what his brother tried.
He’s hardly alone in this belief. Indeed, with the bizarre exception of Donald Trump, all the Republican candidates put tax cuts that would benefit the wealthy at the center of the their ideas for helping the American economy. So why can’t they learn from history?