My Top Priority for Tax Reform: Middle-Income South Dakotans
By Sen. John Thune
The American people have had a rough time over the past few years. Fifty percent of Americans consider themselves to be living paycheck to paycheck, while almost a third of voters say they are just $400 dollars away from a financial crisis. That’s not acceptable. Fortunately, there are things we can do about it, starting with comprehensive tax reform.
Comprehensive tax reform is perhaps the single most important thing we can do to provide financial relief to American families and get our economy back on the path to long-term health. That’s why Republicans in Congress have spent several months working with the Trump administration on a tax reform framework that we believe will lead to more jobs, fairer taxes, and bigger paychecks, and why the tax-writing committees in the Senate and the House of Representatives are currently hard at work drafting legislation.
Our tax reform framework prioritizes tax relief for middle-income Americans by ensuring working families receive a much-needed increase in take-home pay. To start with, our plan will lower income-tax rates for hardworking families around the country. We will also double the standard deduction to $12,000 for single filers and $24,000 for married couples who file jointly. While all Americans will benefit from this provision, it will particularly benefit the low-income families who need help the most. Under our tax plan, a family making $24,000 or less per year will not have to pay a dime in federal income taxes.
There is no denying that raising a family in the United States is getting more and more expensive. That’s why we will also help working families by increasing the size of the child tax credit. This will free up money that families can use for anything from dentist bills to college savings. And for low-income families who won’t pay income tax under our plan, up to $1,000 of this new, larger child tax credit will be refundable.
In addition to direct relief for working families, our tax plan will also provide for the kind of economic growth needed to give hardworking Americans access to new jobs and opportunities and increase their take-home pay. To start with, our plan will lower tax rates for small businesses and family farms and ranches.
Small and medium-size businesses are an important engine of economic growth, but our tax code makes things more difficult for these job creators by saddling them with high tax rates — at times even exceeding those paid by some large corporations. By lowering tax rates for these businesses, we can help them reinvest more of their earnings into their operations. The Republican tax plan will also allow small and medium-size businesses to recover their costs more quickly, which will also help free up money they can use to grow their business and create new jobs. This is good news for the American worker.
Americans have spent too much of the past decade struggling with high taxes, stagnant wages, and a lack of opportunity. It’s time to give them relief. Right now, we have a unique opportunity to implement pro-growth tax reform policies that will provide more jobs, fairer taxes, and bigger paychecks for hardworking individuals and middle-income families across the country. As we move through the legislative process, I will continue to work with President Trump, my fellow members of the Senate Finance Committee, and leadership in the House to ensure that comprehensive tax reform makes it to the president’s desk for his signature.
*Note to editors: A similar version of this column was published on www.time.com.
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I quite agree with Senator Thune that Americans have “spent too much of the past decade struggling with high taxes, stagnant wages, and a lack of opportunity. It’s time to give them relief. Right now, we have a unique opportunity to implement pro-growth tax reform policies that provide more jobs, fairer taxes, and bigger paychecks for hardworking individuals and middle-income families.” Moreover, I support his proposal to prioritize: “tax relief for middle-income Americans by ensuring working families receive a much-needed increase in take-home pay… our plan will lower income-tax rates for hardworking families around the country and double the standard deduction to $12,000 for single filers and $24,000 for married couples who file jointly.”
Those are solid, pragmatic ideas.
Complete fantasy! The stated objective is tax reform will be revenue neutral. All we hear is tax cuts and eliminating taxes for everyone and oh ya cut the deficit. Let’s hear about the cuts that will need to happen and watch the wheels fall off the fantasy wagon!
– average tax rates are in fact lower than most years in the past five decades, at least for the three income groups we
This person said that those like Flake and Corker should not express their opinions about Thunes “glorious leader”—So much for that pesky Constitution.
Not what he said at all.
This person said that those like Flake and Corker should not express their opinions about Thunes “glorious leader”— in public…. Post the quote, then claim it is lie..
Remember when Senator Thune used to be a Deficit Hawk?? This guy falls in line every single time. Would love to see some independence and courage.
He still is a deficit hawk. And a good one.
$2.4 trillion to deficit.—
If that would actually happen he would still be a piker compared to the spendocrat, America-hating Obama.
Why can’t the govt cut spending by the amount of decreased revenue from tax reform? Oh yeah, there is no govt waste, right??!! How about the penny plan I heard about at one time — every govt agency has to cut their budget by just 1% across the board? Or get rid of base line budgeting?
“tax reform = tax cuts for the richest—– that will increase revenue….. Have you not learned that with Kansas?
I’m all in favor of some kind of tax reform, but what Thune fails to mention is the President’s plan, which he vastly supports, is to pay for this middle class tax relief by drastically reducing Medicare and Medicaid. The financial relief Thune boasts about would come to the detriment of our elderly, our children, and our low income citizens. I understand the middle class is important to our national economy, but let’s make the top 1% wage earners give a little more to help the middle class, not the people who can least afford it; the most vulnerable of our society.
Just who do you think already pays almost all the taxes?
Just who do you think benefits most from the system?
Those on welfare who don’t contribute, Ike. Take your class warfare to Russia.
Who said anything about ‘welfare’?
My point was simply that the most wealthy in society have the most interest in stable government and social mores. They rely on the government and society-at-large to remain wealthy. If you are the primary beneficiary, you should shoulder the largest portion of the cost.
Under this latest tax “reform”, the wealthiest among us fail to pay that which they most benefit from, whereas the rest of us see little to no meaningful change, and additional strain on our progeny to pay for it all.
“Entitlements” account for a huge portion of the budget. Don’t people who can get a job from a corporation that can finally compete in the global market benefit from tax cuts? Taxes from people with jobs would then contribute instead of using “entitlements”.
Ah, yes. The ol’ “Trickle-down” theory. Yeah, that doesn’t actually work, and I frankly surprised anyone who’s not amongst the most wealthy of Americans actually believes that… In fact, I’m pretty sure the most wealthy made it up in the first place to placate the masses.
It’s been proven time after time that decreasing taxes of the rich does NOT result in gains for middle- and lower-income people. What actually occurs is that capital tends to accumulate only for the rich – a bigger and bigger piece of the pie.
If, as you claim, the richest are the primary beneficiaries, your argument is already lost because they already shoulder the largest portion of taxes. Those who contribute nothing in the form of federal taxes reap huge benefits in our society– subsidized housing, free health care, subsidized or free child care, food stamps, free phones, and earned income tax credit where they get money from the govt even though they pay nothing in.
Here’s a thought for you to chew:
Who has more to lose: the man who has nothing or the man who has everything?
Tax law is not written by the poor.
Tax law is not written by the poor, but consider the effects of the proposed reform on a married Sioux Falls couple that files jointly. One adult is a stay-at-home parent. The other works full-time, earning $92/ day take home. The couple has one baby (& another on the way). It’s tough to pay rent & feed a kid on that income.
Under Thune’s plan, this family GAINS almost $100 per month. I understand that millionaires in Miami and Hollywood wipe their noses with $100 bills, but for most South Dakota families $100/month makes a huge difference.
We can try to soak the super-rich, but it always proves a fool’s errand. Tech moguls hire tax attorneys to find loopholes. Actors hide money offshore. Multi-millionaire politicians endow so-called charitable foundations that cover the founders’ Gulfstream jets, 5-star hotels, and $1,000 brunches. New York billionaire Donald Trump admitted his lawyers found endless clever (but legal) ways to avoid high taxes. Whatever law we write, DC insider lobbyists pierce. See Podesta, Manafort, etc.
Can we design a tax plan that saves (or even gives) struggling, entry-level workers more? Yes. But if we demand perfection, we’ll end up without reform.
FYI: Nearly 100% of the economic statements said by Ike are rejected by 90% of economists and almost no serious non-political economists even talk about matters in the terms said by Ike. He is making statements as fact which are actually political opinion rejected by economists.
Seriously? The “Laffer Curve” is considered debatable at best. James Tobin, Alan Blinder, Greg Mankiw, Paul Krugman, Robert Prasch, Jared Bernstein… (shall I go on?) have all refuted the notion of supply-side/trickle-down economics as a functional theory to increase growth. Given our historically low current rates. There is NO school of economic thought (beyond wishful thinking) that believe a tax cut NOW would spur the sort of growth that would “pay for itself” without corresponding decreases in spending coupled with INCREASED tax rates for certain sectors/incomes.
But I digress. Troy has gotten far too crabby of late, and eschews civil discourse for name-calling, sound bites, and little substance. You do you, Troy. Nobody else will.
Nearly 100% of the things Troy says are rejected by 90% of the intellectual, humanitarian college students on social media.
Ike,
Quacks all. Thanks for giving a good concise list of unserious political economists and making my point.
By the way, tax cuts to stimulate growth is not just embodied in Supply-side Laffer curve economics but also Keynes demand side economic includes high taxes as suffocating economic growth. And, since now we have 95% of income taxes paid by the top 20%, if taxes have become suffocating, tax cuts will go primarily to those paying income taxes, the top 20%.
One other thing, Mike, the goal of economics is optimizing both demand and supply which maximizes jobs, income and economic security for the most people. Whether it be Keynes focus on demand or Laffer’s focus on supply, both understood sound economics required the long-term equilibrium of supply and demand and neither did the uninformed rejection of the other so cavalierly as you do. Proves another point.
I respect your viewpoint but, IMHO, Professor Mankiw is no quack. I don’t accept every word he’s ever said, but I find him an insightful, knowledgeable, and charming person. Although he’s a Harvard professor, he is a Republican. Sure, he’s too liberal for some (he advised George W. Bush & Gov. Romney) but he’s too conservative for many Ivy League drama queens, who (to protest Mankiw’s “radical” views in 2011), staged a “walk out” of his class. Mankiw certainly agrees that we MUST cut wasteful federal spending, but he knows tax cuts almost always stimulate economic growth. As he says, “elimination of the estate tax and lower individual tax rates help sole proprietorships, partnerships, and S corps. For these taxpayers, income flows through to their individual tax returns. All these initiatives lower firms’ cost of capital. The tax cuts thus support demand—both consumption and investment. This helps bring the economy closer to potential. Lower marginal tax rates on labor income such as wages and on capital income such as dividends and capital gains improve incentives and boost growth in potential output. Lower marginal tax rates on wage income will increase work effort, while lower taxes on capital income will increase investment and thus capital accumulation. More capital means each worker has more tools and is more productive, and improved productivity means higher wages. In addition, lower taxes on dividends and capital gains reduce the unequal tax treatment of corporate and noncorporate capital. Moving toward a level playing field between different types of capital will increase efficiency, as capital is allocated with more of a focus on profit and less concern for tax avoidance.”
Troy: “Nobody thinks that.”
Ike: “Here are some people who do.”
Troy: “Those people are dumb.”
So, you’re the final arbiter of who is, and who is not a qualified economist? Please post your list of great economic supply-side minds so that I too can dismiss them out-of-hand as “quacks”.
Besides, there’s more interesting stuff to read about today concerning the orange orangutan occupying the Whitehouse. This tax reform proposal will most likely crater before it even gets off the ground.
Mike,
Not what I’m saying. Those are “economists” respected in the political press (and in certain economist circles) for what they say and how they communicate it. They aren’t known for their actual contribution/study/analysis in the field is such when they make certain pronouncements they are relying on original work of others and not their own.
There are others on the conservative side who I dismiss as readily. But, that isn’t my real point Mike: Your main argument was specious and a misrepresentation of the economic argument for tax reform being pushed by Trump/Republican leaders with some growing support from Democrats.
There are no economists who think 100% taxation is good for growth, jobs, income and economic security. Do you? How about 90%? 80%? No matter what you pick below 100%, you concede too much taxation can be bad for growth, jobs, income and economic security.
In addition to the additional political camp which desires redistribution for its own sake without regard to impact on growth, currently there are basically four tax camps:
Pro-reform (updating the tax code to today’s economy vs. the 1980’s when it was written) and higher taxes collected.
Pro-reform and lower taxes collected.
Anti-reform and higher taxes collected
Anti-reform and lower taxes collected.
Everyone of your comments were political statements disguised as economic statements, of which whether here or DFP, you’ve never shown any basic understanding. And, when called out (moreso on DFP), you respond without addressing the primary point made against what you said.
I really don’t care whether you are pro-reform or anti-reform (know you are for higher taxes collected or taxing the wealthy more) but the thrust of your argument is a zero-sum argument (whatever benefits the rich hurts everyone else). I’d like you to cite a single economist who believes economic activity is zero-sum with anything more than their mouth.
Troy, I wasn’t implying a zero-sum game in promoting progressive taxation on wealthier citizens – you doth project too much. I simply meant that lowering taxes on those wealthy citizens NOW will not result in greater gains for the poor and middle class, and that wealth will NOT be re-invested into the pockets of the poor – rather it tends to accumulate at a much larger rate into the pockets of the wealthy. The disparity therein creates the economic stress for the less fortunate at increasing rates… THIS is how you wind up with populism. As much as you’d like to remove politics from the discussion of economics and taxation, I’d like to have some of what you’re smoking to think that’s even possible.
…and I don’t know who you think I am, but I don’t think I’ve posted on DFP more than a handful of times and probably not within the last year or more… and I don’t recall ever having a conversation with you there. Your doxxing game needs work.
Ike,
My mistake for the confusion and I apologize. Your position is just strikingly similar and manner. Again, I’m sorry.
Let’s just say I disagree tax cuts won’t disproportionately benefit the poor and middle class. In the last 30 years, virtually every tax change has been an attempt to redistribute wealth but the end result is wealth disparity gets worse. I think Obama (among others) said “doing more of the same and expecting different results is insanity.”
Your entire second sentence is directly asserting a zero-sum game (or maybe a gain for some but nothing for others which would beg a different question). Economic growth leads to more and better jobs which leads to greater economic security and independence for the poor and middle class.
Right now both the structure of our taxation and its levels are huge impediments to growth. If we don’t have at least double the annual growth we had during the Obama administration, the long-term impact on the poor is unimaginable. There hasn’t been a single pro-growth word from the Democrats since Bill Clinton as their focus has been on redistribution (back to the zero-sum game).
Economic growth in and of itself doesn’t mean much – I think you need to consider which sectors of the economy are growing/shrinking before you can make the ‘rising tide lifting all boats’ arguement. Lowering capital gains, top income, and inheritance tax NOW would, in my view, increase wealth accumulation for only those at the top of the economic ladder while doing nothing for the poor and middle class. Those sorts of cuts only incentivise “hoarding” by the very wealthy. I think if you’re going to cut anything – and there’s a lot more nuance to this than what I feel like typing right now – I would look at cutting corporate tax rates coupled with increases in taxation for the other areas i mentioned – this takes away the decision-making from individuals and puts into the hands of the group.
“Economic growth in and of itself doesn’t mean much” never said by a serious economist. Growth is the only way to increase wages and economic security for the poor long-term. You can only steal other people’s money for so long.
P.S. I challenge you to find a single period in history where there was wealth hoarding during periods of growth since the time of the Roman Republic. But, during periods of no growth, wealth hoarding is common. Keynes is the guy who articulated the concept. Pretty basic economics of which there is virtually unanimous agreement in the economic field. Pretty sure even your list of economists would repudiate what you said. In fact, those who are Keynesian would do so with some vigor because it is fundamental demand-side stimulus.
Sidenote: It seemed hard for you to even whisper there might be a rational for cutting a tax. Almost a phobia?
“Wealth hoarding is common” – so you admit it!
Sheesh. Selectively trimming a quote to make a strawman argument is a bit sophomoric, no?
Pretend the economy is made up solely of milk. Increasing the amount of milk you get doesn’t do much for you if you’re lactose intolerant. High growth rates in one sector can have an adverse effect on growth in other sectors – even if there’s a net gain, there will still be some losers – THAT is what we should be trying to avoid. Point being, growth by itself doesn’t tell us much – we need to know where that growth should be and where it actually is before we can make determinations about who or what is deriving the most benefit. Right now, the rich are getting richer, the poor poorer, and the middle is shrinking. I, too, want to grow the economy. I want it to grow in such a way that we do lift all boats. The way the President and Thune want to go about it leads me to believe that the only boats getting lifted are yachts.
Let’s keep this simple: increase taxes on portions of the economy you don’t want to grow as much, and decrease taxes on those portions you want to grow more. At this point in history, I think the best place to lower taxes is on the corporate earnings to incentivise re-investment and re-patriation of profits. I think it’s best to increase taxes on high wealth individuals to disincentivise wealth accumulation as a goal unto itself.
Mr. Barranco – Your example of a low income family exempts the deep wounds to Medicare and Medicaid within the proposed tax cut. No way would this family see a net increase in lifestyle. Cutting entitled services from the world’s richest country to grow the wealthy is just wrong.
#1 Prayers for the victims and families in New York.
#2 I respect your opposing view. Medicare and Medicaid are critical. You worry President Trump will inflict “deep wounds” into these important programs, and you oppose tax reform on that basis. It’s unclear how changes to MediCARE would impact a young, low-income family, so I’ll address your question about MedicAID.
NO ONE proposes cutting Medicaid. Taxpayers spent $368 billion on Medicaid in 2016. Trump pledged to spend MORE than $368 billion on Medicaid; his proposal allocates an increased budget for Medicaid every year. What some disingenuous scribes call “cuts to Medicaid” are proposed reductions in the program’s future growth. Under the White House plan, 10 years from today, taxpayers will spend $520 billion on Medicaid. Obama hoped to spend even more: $690 billion in 2027.
As a percentage of the federal budget, Medicaid (under Trump’s plan) will remain 9.6% of the total. Thus, it’s misleading to say Trump seeks a Medicaid cut. This allegation’s lack of truth hasn’t prevented some from making it. Salon said Trump “wants to gut Medicaid.” The New York Times says Trump’s budget “cuts deeply into Medicaid,” while Tom Perez, Chairman of the Democratic National Committee, said the Trump budget “absolutely dismantles Medicaid.”
In reality, Trump’s budget grows Medicaid. The President plans to increase Medicaid expenditures 42% over 11 years (from 2016 to 2027). That averages to a 3-4% annual increase. Love it or hate it, that’s Trump’s plan — greater Medicaid spending.
I recognize and understand that some believe +4% funding growth isn’t enough. As an American, you’re entitled to your opinion. Perhaps you feel Medicaid’s growth rate should be +5% or even +6% per annum. Why not 7 or 8? A socialist, when asked “how much should we give?” only answers “More! More! More!”
Obama spent $368 billion on Medicaid in 2016. Trump proposes to spend $400 billion on Medicaid in 2018, but you feel that’s too stingy. And who knows? Maybe you’re right. I don’t pretend to see the future. Medical costs are going up. Maybe a depression is coming, and 36% of Americans will be on Medicaid in 2 years. Regardless, Trump’s plan is not a “cut.” Out on main street, USA, a CUT means: “spend less.” When I “gut” a fish, I remove its innards; I don’t enlarge it. The President wants to spend billions MORE on Medicaid than we spend today. He may be wrong, but he’s not “slashing” or “gutting” anything.
I respect your stance. You seem like a compassionate person. You feel our federal government should be MUCH more generous with future Medicaid spending. Cheers to you. But surely you don’t agree with Perez that spending 400 billion taxpayer dollars ($400,000,000,000.00) means the program is “totally dismantled?” Because that dog don’t hunt.
Peace be with you.
Ike,
You really should just take a few basic economics classes. You shouldn’t take solace wealth hoarding occurs (I never denied it didn’t but affirmed it happened) since it only occurs during periods of no growth and in expectation of anti-growth policies (according to Lord Keynes) which by itself should cause you to rethink about everything you said above.
And you’ve got it backwards. Low wages and wealth disparity are not the RESULT of insufficient growth, they are the CAUSE. Can you explain why income gains by all Americans used to track fairly close to economic growth, but sometime around the mid 70’s, all that started to change, and the only real growth in income since came to the top 1%? The problem here is not high taxes – this has been through several tax increases and decreases, boom and bust cycles.
Ike,
Your assertions are just too easy to refute. Income disparity increases when growth declines. Your cause and effect is what is backwards. Note this from a pro-lower class economic think tank. http://www.stateofworkingamerica.org/charts/real-annual-family-income-growth-by-quintile-1947-79-and-1979-2010/
In periods of stagnation, the wealthy continue to move forward while the poor and middle class stagnate or go backwards. As the chart shows, the period of stagnation during the Obama years, the situation of the poor relative to the wealthy was at its worst.
The only time the poor win is with growth. And the only time the rich ever lose their riches and there is a real redistribution is during the times of economic chaos and regeneration during periods of growth. Its the economic experience of the last 4,000 years.
But, here is what is best about this conversation: In confirms to me the liberal mind just can’t grasp growth as a good thing and can only see redistribution as a solution. That failure to grasp growth and what the working class knows is good for them is why they will vote more and more Republican- Republicans understand what their household needs for better future economic security.
So, you keep singing your song of envy and governmental redistribution and I’ll sing the GOP song of growth, jobs, opportunity, and economic security.
P.S. The implosion of our social welfare net is guaranteed without economic growth. Growth is the only possible means for us to meet these obligations. You can’t even confiscate enough wealth to cover that hole.
In reality, your policies are and will do the most harm to the working people of this nation.
No explanation as to why wages have stagnated for the lower and middle classes since the 70s, eh? Yeah, keep parroting the gop talking points about grow grow grow and fail utterly to grasp that those policies alone aren’t getting the job done. Kansas anyone?
Ike,
Don’t know why I respond since your mind is made up, you are unwilling to absorb facts which transcend your lack of information, and it will go over your head.
Two points:
1). stagnation of poor and working class correlates with growth of government, regulation and higher taxation.
2). For 3,000 years gap grows during slow growth and narrows during growth. Growth has been shrinking since 70s.
In short, liberal policies are making it worse for the poor. Liberals get to feel better about themselves because they clamor on behalf of the poor despite making it worse for the poor. Your faux concern for the poor is really your need to feel good about yourself. In further summary, your love of self matches your hatred for the poor.
…and there it is. Troy demonizing the “other”. Hatred for the poor? Tribalism trumps fact, apparently. Cripes. Get a grip, fool.
We’re done here.
Ike,
You can say whatever disparaging thing you like about Republicans, Trump, or the rich and their character or motive but your character and motive can’t be questioned. Obviously, it hit a nerve because it rings true in your heart- you envy the rich, you hate the poor. I am sure it a hard place to live and I am sorry it is your lot.
Wrong, Mr. Barranco.
President Trump strongly supported the passage of the AHA, which would “gut” the safety net of low income and disabled voters.
https://www.forbes.com/sites/eriksherman/2017/05/23/trump-budget-does-cut-social-security-and-medicaid-breaking-major-promises/#35ca83cc9b75