Tax Reform 'Armageddon' Aftermath: As New Fiscal Year Begins, Federal Tax Revenues...Increase

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Posted: Nov 26, 2018 10:25 AM
Tax Reform 'Armageddon' Aftermath: As New Fiscal Year Begins, Federal Tax Revenues...Increase

Regular readers are aware that I was a strong advocate of the GOP-passed tax reform law, dedicating much time and energy in this space to dispelling demagoguery, exaggerations and lies about the policy.  I've also devoted a fair amount of effort to debunking liberal myths about taxation levels and "fair share" politics -- including this recent piece about the wildly disproportionate share of federal taxes paid by the wealthiest Americans.  In case you missed it, here's the key takeaway:


I framed this data within the context of Democrats' persistent and dishonest attacks on the new tax law, which have contributed to public ambivalence about the needed reforms.  The recent law consistently polls within a few points in either direction of break-even (yes, a vast improvement over the days when the left-wing propaganda machine was in overdrive), and 2018 exit polling data shows that nearly one-quarter of voters said they believe the reforms have actually hurt their personal finances.  Fewer than one-third said the law has helped their situation, with a large majority saying it made no difference either way.  In reality, numerous nonpartisan analyses have demonstrated that close to 90 percent of taxpayers received a tax cut, with only about five percent experiencing any increased tax burden (mostly high-income earners in high-tax blue states).

Democrats made all sorts of ludicrously dire predictions about tax reform, warning that it would slam the middle class (it did the opposite), would fail to stimulate the economy (it clearly has), and would bankrupt the country.  The handwringing over deficits and debt are impossible to swallow from the party of Barack Obama and Nancy Pelosi.  That said, it's true that the Trump administration is racking up irresponsibly and historically massive deficits -- alarmingly, during prosperous times, all while evincing virtually no seriousness about our long-term debt bomb.  This short-sighted and cowardly recklessness is becoming a bipartisan tradition.  But it's also true that allowing Americans to keep more of the money they earn, and making the US corporate tax rates (both statutory and effective) more globally competitive, are in no way major or serious contributors to Uncle Sam's rising tide of red ink.  Even after the tax law was implemented, government revenues as a percentage of GDP are projected to remain above the average of recent decades:  


As always, it's a spending problem.  To underscore this reality, over at HotAir, Andrew Malcolm notices that in the first month of the new fiscal year, federal tax revenues soared to an all-time high:

Just 47 weeks after Trump put his flamboyant signature on the bill, it’s all happening. Unemployment is at an historic low. Employment is at an all-time high. Wagers are growing after years of stagnation. And now from all that increased economic activity, the federal government has just reported historic record tax revenues in October, the first month of the new fiscal year, of $252,692,000,000. That’s more than $11.4 billion above revenue for October of last year, which was the previous record tax revenue for an October. And it did this by collecting more than $3 billion less in personal income taxes, thanks to the tax cuts. The new revenues were the result of increased business taxes because of increased business. Here’s how much different it was: Corporation income tax receipts to the U.S. Treasury this year in October were a whopping $8,000,000,000. This compares to the previous October’s $3.8 billion. Despite the record tax revenues in October, the federal government ran a deficit of $100.5 billion that month because...spending. 

Even with the economy roaring and fresh tax cuts producing growth (leading, in turn, to higher revenues), Washington is still spending much, much more than it's taking in. Republicans will cynically blame Democrats' overspending (although it's true that Democrats are positively allergic to necessary reforms to save the entitlement programs they claim to care about) for this problem, while Democrats even more cynically blame tax relief.  If and when their party regains unified federal power, they'll undoubtedly seize on GOP tax cuts as a specious excuse to explode spending even further:


I'll leave you with a brewing battle on the Left, in which their enthusiastic rhetorical support for middle class tax cuts (Democrats, err, just unanimously voted against a giant middle class tax cut, then against a measure to make the cuts permanent, as they'd demanded) is colliding with their statist ambitions:

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If Democrats want to impose a single-payer healthcare scheme, they'll need to inflict gigantic tax increases on middle income households and working Americans.  That's a mathematical fact.  No wonder so many leftists are angry about the Democratic proposal to create a supermajority threshold to approve tax hikes on the middle class.  They know they'll need those big tax hikes to partially fund the future of their government supremacist agenda.  Voters, beware.