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President Trump’s Tax Plan: Why Rational Republicans Should Bail

Fri ,10/11/2017

President Trump’s new tax plan looks a lot like Governor Brownback’s tax plan for Kansas, which had been disastrous for the state’s economy. Rational Republicans should realize that if an experiment fails, and fails miserably, there is no point in repeating it. That is particularly true when the economy of the entire country is at stake. Both the economic theory and Governor Brownback’s experiment with the Kansas economy show that Trump’s tax plan is doomed to fail our country. The tax bills now winding their way through Congress will lead to economic stagnation and an increased  in the national debt of $1.5 trillion, both things which are repugnant to rational Republicans.

The Theory is based on Laffer’s curve which is displayed at the right. 

The Laffer curve looks like a normal distribution curve. In theory, if the nation is on the high side of the curve with taxes around 80%, then the curve predicts that cutting taxes will cause a move to the left along the curve, increasing tax revenue. That is likely to improve economic growth.  If the nation is on the low side of the curve with taxes around 40%, then cutting taxes will also lead to the left along the curve,  decreasing tax revenue, leading to a stagnating economy, and certainly a greater public debt.

The United States is now on the low side  of the curve with the high marginal tax rate around 40% – so cutting taxes will not lead to increased revenue or spur economic growth. Laffer should know that, but he has abandoned reason and professional ethics and now just supports tax cuts without reference to his own curve. Kansas paid Laffer $75,000 in consultation fees. His advice, when the Kansas economy was tanking, the public debt was mounting, and job growth was decreasing – was to stay the course. Kansas Republicans finally realized that the experiment had failed. They increased the tax rate, and overrode Governor Brownback’s veto of the tax increase. The governor is now leaving the state before his term is up.

The failure in practice is described by Duane Goossen, who was the Kansas budget director for 12 years prior to Brownback’s experiment:

  • “Just like the Brownback tax cuts, the Trump plan makes dramatic changes to tax policy by consolidating income tax rates and reworking deductions. Most notably, the Trump plan offers an enormous tax break to individuals who receive “business pass through income.” In Kansas this feature has become known derogatorily as the “LLC loophole”, allowing business income to be sheltered from income tax while people who earn a paycheck must pay tax.
  • Given that the same economists who advised Brownback now advise Trump, it’s unsurprising that his administration uses similar arguments to sell its plan: the tax cuts will grow the economy and create millions of jobs; the tax cuts will pay for themselves; everyone will benefit. Brownback said all that, too.”

At the right is a graph showing job growth in Kansas during Brownback’s years. It is lower than the United States job growth and much lower than in California, which has a high tax rate.

  •  Mr. Goossen goes on, “But after five years of the Brownback experiment in Kansas, we know the real result. Kansas has an anemic economy and one of the lowest rates of job growth in the nation. A dramatic drop in revenue broke the state budget, wiped out reserves, significantly boosted state debt, and put public education at risk. And that part about everyone benefiting — well, it turns out that the bulk of the benefits went to the wealthiest Kansans while the tax bill to low-income Kansans went up.
  • The idea that tax cuts will ‘pay for themselves’ or that tax cuts for the wealthy will ‘trickle down’ to the middle class should be added to the list of discredited ideas that sound good but don’t work. The sell job was seductive, but Kansans have the raw experience to grasp that the experiment carried out on us was a failure.
  • Do you know how hard Kansas legislators must labor now to fix the financial disaster? Are you catching on that general fund revenue has fallen $1 billion below expenses? Can you see how all political energy goes into crisis management rather than building our future? Is that what you want for the entire country?”

There you have it.

The Eisenhower Memorial is now being built and the Kansas politicians are using it as a chance to praise Eisenhower.  Eisenhower was a great General and President because he realized that it required requisite resources to get the job done. Under Eisenhower, the top tax rate was 90%. Eisenhower used the money to pay our war debts, rebuild Europe, educate returning GIs, and build the national highway system which ensured economic growth for decades to come. We no longer need a 90% tax rate, but our tax rate is now too low, and cutting it further will deprive the country of the resources it needs.

The the current Republican tax plan is taking shape. The big winners will be corporations and those already wealthy. Though billed as a tax cut for the middle class, the biggest losers will be the middle-class taxpayers and United States economy. Under the proposed plan we will see:

  • “Up to half-a-trillion dollars cut from Medicare and Medicaid
  • Substantial increase in the national debt with no way to pay it off
  • Elimination of state and local tax deductions – designed to hit people who live in “blue” states the hardest
  • Repeal of an itemized deduction for medical expenses – hitting people who rack up large medical bills because of the inadequacies of our health insurance system
  • Repeal of the deduction for interest on student loans
  • Repeal of the deduction for teachers purchasing classroom supplies
  • Slashed incentives for wind energy and electric vehicles, while maintaining most of the permanent oil incentives and extending nuclear energy tax breaks”

Our current Republican tax plan will add over a trillion dollars to the national debt and will not provide the resources needed to take care of the needs of our country and build for the future.. The tax rate we now have is already too low as the national debt is increasing. Cutting taxes further will surely lead to economic stagnation and an increased national debt, both things which are repugnant to Republicans.

(c) 2017 J.C. Moore

 

ALEC: The Largest Tax Hike in Kansas History?

Wed ,02/08/2017

“The Largest Tax Hike in Kansas History: Now What?” That was a title of the talk given by Jonathan Williams, from the American Legislative Exchange Council (ALEC), when he spoke to the Wichita Pachyderm Club on July 28.

When the title of the talk is misleading, then what?

In 2012, Kansas Gov. Brownback tried Laffer’s theory by cutting the income tax rates and exempting 330,000 businesses from paying taxes on pass-through income, called the LLC loophole. Because of the decline in tax income, Kansas cut school funding, deferred payments to the states pension fund, and borrowed heavily from the highway fund. To fill the budget holes, the legislature in 2015 increased sales taxes and cut state income tax deductions. The state’s major newspapers labeled that tax increase as a largest in state history.

 

After Gov. Brownback’s experiment with Arthur Laffer’s trickle-down theory left the state’s finances in shambles, the 2017 Legislature restored the taxes to their 2012 level and overrode Gov. Brownback’s veto of the budget. Mr. Williams claimed that was the largest tax increase in Kansas history. Is restoring taxes to a previous level actually a tax increase? When someone in the audience pointed out to him that Kansas’ major newspapers labeled the 2015 sales tax increase as a largest in state history, he disparagingly commented, “First of all, I don’t put a lot of stock in the state’s newspapers.”  He should.

 

The failure of Gov. Brownback’s tax experiment has been of great concern to ALEC, who represents the interests of Corporation and the wealthy. Laffer’s trickle-down theory has been one of ALEC’s main justifications for cutting state taxes in ways that benefit corporations and the wealthy. ALEC had hoped to persuade more states, and even the federal government, to  try Laffer’s tax cuts. Did he not realize that Kansas just tried cutting taxes, with disastrous effects?

 

According to Mr. Duane Goossen, a previous Kansas state treasurer, “ After five years of the Brownback experiment in Kansas, we know the real result. Kansas has an anemic economy and one of the lowest rates of job growth in the nation. A dramatic drop in revenue broke the state budget, wiped out reserves, significantly boosted state debt, and put public education at risk. And that part about everyone benefiting — well, it turns out that the bulk of the benefits went to the wealthiest Kansans while the tax bill to low-income Kansans went up.”

 

Mr. Williams apparently wanted to convince us that states with low taxes experience revenue growth, job growth, and a growing economy. To that end, Mr. Williams referred to Laffer’s research which claimed  that the nine states that have no income tax had the highest rates of job creation. But most of the growth was in Texas and in a carefully chosen time period when job growth was strong because of oil revenues and population growth.  Besides carefully picking his data, Laffer also ignored other economic indicators – and didn’t do a comparison with high tax states. If Laffer were correct, the nine States  with the highest income taxes should have failing economies. However, that is not the case, as shown below:

 

The nine states with high income taxes had higher economic growth , a much smaller decline in household income, and almost exactly the same unemployment rate. Laffer’s research was biased and would never stand up to peer review, yet many states have used it as a justification for income tax cuts for the wealthy.

 

When Gov. Brownback’s experiment was failing, he paid Arthur Laffer $75,000 in consultation fees to help him find what went wrong. Mr. Laffer’s advice was to just keep on with the experiment. Kansas did, and the budget deficit just got worse. It was also Mr. Williams’ opinion that we had not tried the tax cut experiment long enough.  But did we need to? Laffer convinced Reagan to cut taxes, and much of our current national debt can be traced back to then, as in the graph below.

 

While the link between tax cuts, economic growth, and revenue growth is tenuous, there is certainly a link between tax cuts and public debt. Kansas proved that.

 

President Trump’s Tax Plan: a Disaster for the Economy

Sun ,21/05/2017

Article Photo

Trumps new tax plan looks a lot like Gov. Brownback’s tax plan for Kansas, which had been disastrous for the state’s economy.  It is based on Laffer’s curve which is displayed at the right.

The Laffer curve looks like a normal distribution curve. If the nation is on the high side of the curve with taxes around 80%, then the curve predicts that cutting taxes will cause a move to the left along the curve to increased tax revenue. That is likely to improve economic growth.  If the nation is on the low side of the curve with taxes around 40%, then cutting them will lead to the left along the curve, toward decreasing tax revenue. That  likely leads to a stagnating economy, and certainly greater public debt.

We are now on the low side – so cutting taxes will not lead to increased revenue or spur economic growth. Laffer should know that, but he has abandoned reason and professional ethics and now just supports tax cuts without reference to his own curve. Kansas paid Laffer $75,000 in consultation fees. Here is how it has worked out in Kansas as described by Duane Goossen, who was the Kansas budget director for 12 years prior to Brownback’s experiment:

  • “Just like the Brownback tax cuts, the Trump plan makes dramatic changes to tax policy by consolidating income tax rates and reworking deductions. Most notably, the Trump plan offers an enormous tax break to individuals who receive “business pass through income.” In Kansas this feature has become known derogatorily as the “LLC loophole”, allowing business income to be sheltered from income tax while people who earn a paycheck must pay tax.
  • Given that the same economists who advised Brownback now advise Trump, it’s unsurprising that his administration uses similar arguments to sell its plan: the tax cuts will grow the economy and create millions of jobs; the tax cuts will pay for themselves; everyone will benefit. Brownback said all that, too.
  •  But after five years of the Brownback experiment in Kansas, we know the real result. Kansas has an anemic economy and one of the lowest rates of job growth in the nation. A dramatic drop in revenue broke the state budget, wiped out reserves, significantly boosted state debt, and put public education at risk. And that part about everyone benefiting — well, it turns out that the bulk of the benefits went to the wealthiest Kansans while the tax bill to low-income Kansans went up.
  • The idea that tax cuts will “pay for themselves” or that tax cuts for the wealthy will “trickle down” to the middle class should be added to the list of discredited ideas that sound good but don’t work. The sell job was seductive, but Kansans have the raw experience to grasp that the experiment carried out on us was a failure.
  • Do you know how hard Kansas legislators must labor now to fix the financial disaster? Are you catching on that general fund revenue has fallen $1 billion below expenses? Can you see how all political energy goes into crisis management rather than building our future? Is that what you want for the entire country?”

From : http://www.kansas.com/opinion/opn-columns-blogs/article151800857.html

Note added on 11/05/2017: The Eisenhower Memorial is now being built and the Kansas state politicians are using it as a chance to praise Eisenhower for his great leadership. However, they should have learned the lessons from Eisenhower’s leadership. Eisenhower was a great General and President because he realized that it required requisite resources to get the job done. Under Eisenhower, the top tax rate was 90%. Eisenhower used the money to pay our war debts, rebuild Europe, educate returning GIs, and build the national highway system which ensured economic growth for decades to come.

Our current Republican tax plan will add trillions to the national debt and will not provide the resources needed to take care of the needs of our country and build for the future. It is being sold as a tax cut for the middle class, when most of the benefits go to those already wealthy We certainly do not need a 90% tax rate, but the tax rate we now have is already too low, and cutting taxes further will lead to economic stagnation and an increased national debt, both things which are repugnant to Republicans.

Note added on 11/09/2017:The Republican tax plan is taking shape. The big winners will be corporations and those already wealthy. Though billed as a tax cut for the middle class, the five biggest losers will be:
1. Middle class taxpayers. They receive a small rate cut but will lose many of the deductions they rely on.
2. Teachers. They will no longer be allowed to deduct school supplies paid for from their own pocket.
3. College students. The amount of deductible student debt interest has been cut from $2500 to $202 and graduate students will now be taxed on research and teaching assistantships.
4. Mortgage holders. The home mortgage interest deduction will be cut about in half and there is now a limit on how much taxpayers can deduct for state and local property taxes.
5. Charities. A higher standard deduction reduces the number of people who will itemize and claim charitable deductions.
Source:http://www.care2.com/causes/5-big-losers-in-the-gop-tax-plan.html

 

(c) 2017 J.C. Moore

Alternate Facts Make Fake News

Sat ,06/05/2017
Article Photo

Kansas now has its own fake news source, The Sentinel . Not only does its alternate news misinform the public, but it provides cover for politicians who use it to justify their positions. This letter describing The Sentinel was published in the Wichita Eagle on May 5, 2017.

Alternate facts

The Wichita Pachyderm Club recently hosted a talk titled “Fake News – Hidden News: Holding Government and the Media Accountable.” The presentation was given by Dave Trabert, president of the Kansas Policy Institute, and Danedri Herbert, editor of The Sentinel, a new online news service spearheaded by KPI.

According to Herbert, the role of The Sentinel is to report facts that mainstream media misses or won’t tell you. For instance, she said that factors other than the state’s failure to expand Medicaid were mainly responsible for hospital closings in Kansas. The hospitals, the state’s editorial boards, and the Alliance for a Healthy Kansas have said that Medicaid expansion wasn’t the only factor but it was the major contributor in closings. The Sentinel article does not report that more than $1.8 billion in federal funding to date has been lost io Kansas by not expanding Medicaid and, more importantly, more than 150,000 working Kansans haven’t been able to qualify for Medicaid.

Journalism’s ethics require that publications seek the truth, the whole truth, and publish it; avoid bias for ideological or financial reasons; and avoid sensationalizing headlines and news to attract readership. When asked if the Sentinel would follow those ethical guidelines, the answer from the editor was not a resounding yes but an equivocation of how The Sentinel intends to report what the mainstream media misses – essentially the alternate facts.

J.C. Moore, Kechi

For those unfamiliar with Kansas politics, the Kansas Policy Institute makes up facts to support Gov. Brownback’s positions, and then Gov. Brownback and his supporters quote the KPI’s synthesized facts to justify their position. It is no wonder that Kansas is doing well for its wealthiest but not doing well for the rest of its citizens.

(c) 2017  J.C. Moore

The Truth about Hillary

Sun ,01/05/2016

Almost every day, the Wichita Eagle has opinion articles and comments criticizing Hillary Clinton’s accomplishments and accusing her of lying and corruption. I’m a Republican and once had  a Bernie Sanders sign in the front yard, so I’m an unlikely person to defend her. However, Republicans need to do their part to restore honesty to politics. Most of the controversies surrounding Hillary Clinton have been conjured up by her Republican opponents and are now being echoed by the liberal left.

Hillary Clinton spent eight years as First Lady, eight years as a New York senator, and four years as Secretary of State. She has helped raise over $2 billion for the Clinton Foundation, 89% of which goes to increasing opportunity for girls, reducing preventable diseases, disaster relief, and helping communities around the globe. That’s not a bad resume.

Pulitzer Prize-winning “Politifact” gave Clinton, along with Sanders, the best truth-telling records of any of any of the 2016 presidential candidates. hillary true

Jill Abramson, former executive editor of the New York Times, has investigated every manufactured Clinton scandal since Whitewater and found them mostly baseless. She penned an op-ed in the Guardian where she concluded that: “Hillary Clinton is fundamentally honest and trustworthy.”

If you don’t like Hillary Clinton, don’t vote for her, but please stop spreading the misinformation.

(c) 2016  J.C. Moore