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Trickle Down, but Worse!

On Monday, 21 Republican senators, led by Ted Cruz, sent a letter to the Trump administration, proposing that Trump issue an executive order to give another huge tax cut to the wealthy. You might have noticed that Trump and the Republicans don’t talk much about the last tax cut that they gave to the wealthy, since trickle-down economics again didn’t do as much for the 99% as was promised. Which is probably why this one is being kept somewhat under the radar.

But I want to point out that this proposal is actually worse than last tax cut. The Republicans want Trump to index capital gains taxes to inflation. Here is what the GOP is trying to fix, in their own words:

They want to protect investors in stocks and bonds from inflation. How nice! Unfortunately, this only applies to capital gains, which are already taxed far less than income (money for which one actually works being income).

Furthermore, if you have a regular savings account that earns interest, you don’t get any protection from inflation. According to the FDIC, the national average interest rate on savings accounts as of February 2019 was 0.09% APY. That is 20 times less than inflation, which is currently around 1.8%, so your savings account is losing money. But you still have to pay taxes on that interest.

It should be no surprise that 86% of the benefit of the GOP proposal would go to the top 1% of wealthiest Americans.

You are likewise not protected from inflation if you haven’t received a raise recently, or if you are a retiree on a fixed income.

But the really ironic thing about this proposal is that it causes inflation. Inflation is caused by too much money chasing too few goods. When the wealthy get more money, they often use it to buy property. Not just for vacation homes, but also to turn them into bed and breakfasts. This drives up the cost of housing,

I live in a city where housing prices have gone up as much as 30% in a single year, causing homelessness to spike.

So this proposal will actually increase inflation, but the people who will be causing this inflation will be protected from it. That’s just insane.

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6 Comments

  1. Hassan wrote:

    I stopped reading after word “executive order”. I thought we (conservatives) were supposed to be against executive orders. (I am, but unfortunately I know most republican politicians are hypocritical liars)

    Wednesday, July 31, 2019 at 1:50 pm | Permalink
  2. Raymond Gergen wrote:

    GOP economic thought–or lack thereof–in action.

    Thursday, August 1, 2019 at 8:02 am | Permalink
  3. JB Goode wrote:

    What the hell is unfair about encouraging people to invest for the LONG TERM? If anything this idea will do that. Capital gains should be taxed on how much an investment has earned or lost and accounting for the effects of inflation (or deflation if it occurs) does this.

    Thursday, August 1, 2019 at 9:00 am | Permalink
  4. notycoon22 wrote:

    So, JB, I assume you also believe, then, that wage earners should have their pay increased annually at the rate of inflation at a minimum? And that the minimum wage should, again, at a minimum, track on the rate of inflation? Encouraging long-term savings is a great idea, but doing so at the risk of making the rich richer and the rest of us not seeing any benefit? Not my cup of tea,my friend.

    Thursday, August 1, 2019 at 11:22 am | Permalink
  5. Dan wrote:

    Is this even constitutional? If the person sitting in the White House can do the job of the Ways and Means Committee then are we not now a dictatorship?

    Thursday, August 1, 2019 at 11:52 am | Permalink
  6. JB Goode wrote:

    Why the false equivalency with wages? Stock investment vary in return depending on how well a company performs. Same with labor.

    Damn right that minimum wage ought to be tied to inflation or at least to average prevailing wages.

    One of the very few ideas that would have helped working folks but not the ultra wealthy or those not working was that 2% tax holiday on SS taxes. That was a great idea. It helped ALL workers that made under the max taxable SS salary ($115K/year or so IIRC) and didn’t help super high wage earners dis-proportionally. Unfortunately the (D)s were fine in giving that up along with making many of the Bush tax cuts for the wealthy permanent.

    In your haste to make sure that the rich do not benefit don’t screw over everyone else. Over 50% of households own stock. And in addition I would think that the capital gains on other investments like people’s homes would be treated the same way.

    Bottom line is I probably hate republicans even more than you do but a good idea is a good idea and this one is better than what exists today.

    Thursday, August 1, 2019 at 5:38 pm | Permalink

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