At Forbes, which would hardly appear to be a friendly venue for such a pronouncement, Stan Collender writes:
There’s no economic justification whatsoever for a tax cut at this time. U.S. GDP is growing, unemployment is close to 4 percent (below what is commonly considered “full employment”), corporate profits are at record levels and stock markets are soaring. It makes no sense to add any federal government-induced stimulus to all this private sector-caused economic activity, let alone a tax cut as big as this one.
This is actually the ideal time for Washington to be doing the opposite. But by damning the economic torpedoes and moving full-speed ahead, House and Senate Republicans and the Trump White House are setting up the U.S. for the modern-day analog of the inflation-producing guns-and-butter economic policy of the Vietnam era. The GOP tax bill will increase the federal deficit by $2 trillion or more over the next decade (the official estimates of $1.5 trillion hide the real amount with a witches brew of gimmicks and outright lies) that, unless all the rules have changed, is virtually certain to result in inflation and much higher interest rates than would otherwise occur.
At least he’s putting a marker down. We’re not going to have massive inflation here as long as people here and abroad keep buying Treasuries.
You may recall that I’ve supported lowering or eliminating the corporate income tax but raising personal income taxes to ensure revenue neutrality. There are good economic reasons for that. Not only is the corporate income tax economically inefficient, it has a host of other adverse economic consequences. Additionally, I’m skeptical that a cut in the personal income tax rates will bring the increased consumption and investment that Republicans assume will be the case or, more precisely, I’m skeptical that an increase in consumption in the United States will bring a great deal of economic benefit. It’s a global economy now and a lot of what we buy is already imported from someplace else, mainly China.
Broadly speaking, the bill as currently structured is a significant step towards what you advocate.
I’d say more a baby step forward, one step back. The provisions to lower the corporate tax are good; it would be better to eliminate it entirely but the Democratic leadership finds that completely unacceptable. The personal income tax decrease sweetener in the House bill won’t have the effects they think it will. There are features that will increase growth through greater investment and consumption but no guarantee that the increased growth will be here. But the increased borrowing because of decreased revenue will also reduce growth by increasing interest rates. That will be here.
Just a couple thoughts, and then we get to sit back and see what kind of sausage comes out.
Elimination of the entire corporate tax would be great, but of course is politically impossible. I think one has to take what has been proposed and declare victory.
The minimal effects on personal taxes is disappointing. I know you downplay consumption. But I’ll take the private sector spending their dollars vs giving it to government any day. Plus I think you need to keep some skin in the game for the bottom 50-60%. Else they just vote themselves the Treasury. ( I’ve never bought your payroll taxes argument as evidence of real regressiveness. Pay today, get paid back tomorrow.). They aren’t sin taxes.
As for interest rates. Really? Unless the Fed dramatically changes course the recent and current spending binge has hardly been an interest rate increaser. Side note – the producer price index may be telling us something.