Donald Trump just released his new tax plan and one aspect of it is incredibly stupid.
From his announcement on Monday morning, here’s the descriptive statement:
“This plan simplifies the tax code by taking nearly 50% of current filers off the income tax rolls entirely.”
In other words, a massive quantity of taxpayers will no longer be paying income tax.
Here are the details of the proposal:
“If you are single and earn less than $25,000, or married and jointly earn less than $50,000, you will not owe any income tax. That removes nearly 75 million households – over 50% – from the income tax rolls. They get a new one page form to send the IRS saying, “I win,” those who would otherwise owe income taxes will save an average of nearly $1,000 each.”
There are several reasons why this proposal is a very bad idea.
Firstly, assuming Trump’s proposal is intended to be revenue neutral, meaning that it is designed to not take an even bigger Federal bite of the national income, then for each person who gets to fill out an “I win” form there is another who automatically gets assigned an “I lose” form. The $1,000 that will no longer have to be paid from that winner must necessarily then be paid by some loser.
This is nothing other than a slightly different version of Bernie Sanders’ campaign talking point of “the rich aren’t paying their fair share.”
Here’s the thing: the top 20% of income earners already pay 84% of all income taxes, according to the Wall Street Journal. The top 10% pay 68% and the top 1% pay 35% of all income taxes, according to CNS News.
There is no way that this “it’s good for more people to not pay income tax” argument is based on facts. It is all symbolism and no substance. All it does is further tip the tax burden onto the higher earners.
Secondly, a significant danger in this type of proposal is to further remove a large swath of voters from having a financial stake in the political and legislative game. Roughly 40% of tax filers pay no income tax. That means that these people have the ability to vote for government activities that literally cost them nothing.
Rather than being something to be proud of or brag about, even as George Bush did 15 years ago and as Trump is doing now, it should be something to eliminate. Even if it is merely a dollar or ten of tax due, every single tax filer should owe at least something. They will then have a personal financial interest in how government spends what will in effect be (partly) THEIR money.
One of the hallmark problems with the spending issues endemic to our leviathan of a government is its profligacy and excess. A contributing factor to this is that bureaucrats and politicians aren’t spending their own money. Nothing is easier to do, without a care, than to spend money that is not one’s own on other people.
This line of thinking easily extends to the idea of voting, as well: what would be easier than to vote for programs or spending that is entirely paid for by someone else’s money? “Hey, it’s not my checking account that’s being affected, so what do I care?”
Furthermore, the moral hazard of this extends even further when considering the ease with which one could vote themselves benefits, also entirely paid for by others. Add in the idea that those who are supplying the funds are somehow gaming the system or enjoying immorally obtained funds, and it’s that much easier. “Hey, they don’t really deserve what they have and so they should pay for me to have (whatever).”
Therefore, it is obviously an attempt at a populist appeal for votes. This is certainly understandable yet should also be completely reprehensible. A “hey, vote for me and you won’t have to pay any income tax” approach will certainly capture the attention of many, if not all, of those affected.
But that doesn’t make it right.
What I’d like to see from Trump, and anyone else who is a Republican – especially one that would describe themselves as a conservative – is a statement like this:
“The government spends way too much of our money and I will address that. Washington D.C. wastefully spends too much. Furthermore, the well-intended tax policy changes that have resulted in fewer Americans paying taxes have actually made the problem much worse. We are all Americans and every single one of us benefits from the country we live in –we should all be financially responsible for it, at some level, as well.”
I will NOT be holding my breath.
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