Call it the “Trump tax shift,” not the “Trump tax cuts”

Here is my Bloomberg column on that theme, excerpt:

It’s easy enough to pick on unpopular taxes as the problem, but the main issue is cultural presuppositions about what government should and should not do. That’s where any real tax reform would need to come from.

Do note the plan will be harder to pull off, the more specific it has to become.


The revenue will not be made up. The Central Bank will learn to tolerate higher future inflation in response to a "once in a generation" shortfall in demand. They will find the academic justification to do so. Asset owners will win first, when their taxes are cut, then win again when the USD is devalued.


Imagine a 0% tax rate for American businesses (and that portion of foreign business conducted wholly within the U.S.). Our economy would go into a sustained boom without precedent. American companies would have an advantage in world markets and American consumers would be able to buy goods and services for less. Everyone could have a job in that kind of economy and gross federal tax receipts would increase. No! We can't have that.

Except you do know corporations are sitting on record levels of reserves right now. Cutting taxes and adding to those piles wont change anything. Companies use that money for future investments (usually). Just because the pile is bigger doesn't mean there are new opportunities to invest.

"Some" corporations are sitting on a lot of money. But who cares. A typical company will either distribute the earnings/profit to owners/share holders where taxes will come due and be paid OR they will use the money to reinvest and grow their business which benefits everyone in the economy. Money sitting in a vault is not a good investment. Without the tax costs/penalties corporations would be free to expand and invest in growth.

Alternate hypothesis:

With a 0% corporate tax rate, owners of capital and large investors reap a windfall of profit, virtually all of which is retained as profit.

American consumers could "buy goods and services for less" if we had more free trade, but I guess we can't have that.

With a 0% corporate tax the money could only be used to expand the business or to hold for future expansion. Once it is distributed as profit to the owners/shareholders it would become taxable. A 0% tax would incentivize companies to reinvest that money.

"American consumers could “buy goods and services for less” if we had more free trade,"
We have almost unlimited free trade. What we don't have is full employment. Almost everything I buy at the store was manufactured overseas from raw materials acquired overseas and by overseas workers. How much more free trade do you want. The problem with all that free trade is all our jobs go overseas. We should Make America Great Again and manufacture products here to benefit the workers here.

Tax happens.

Not necessarily. You just have to get the weaker members of the Supreme Court to agree to call it something else and suddenly it's not a tax!

Or vice-versa. SCOTUS could say that a law dictating that people caught owning guns are subject to a $1 billion fine is perfectly acceptable, because hey, it's just a tax!

"Or vice-versa. SCOTUS could say that a law dictating that people caught having abortions are subject to a $1 billion fine is perfectly acceptable, because hey, it’s just a tax!"

Let us hope they don't.

You make a great point. I've often wondered how Al Gore would react if "scientists" decided that the root cause of "global warming" was some kind of gas released during abortions.

Think he'd be so passionate about the topic?

There has been increased feminization of male fish in the waterways of the West. There have also been decreased sperm counts in Western men.

And a rise in female hormones from birth control in the rivers and lakes of the West.

I wonder if Gore would support a ban on female birth control pills given what seems pretty certain to be their impact on the environment? Naah, only kidding. I know what Gore would support. Abortion and it's associated chemicals are the main sacrament the Left has. He would never dare.

In the meantime given the associated risks of heart disease, if the pills was designed to do something useful like cure cancer, the FDA would ban it. Fen-fen was banned for less.

"Abortion and it’s associated chemicals are the main sacrament the Left has."
As opposed to human sacrifices to the NRA as in Vegas?
"I wonder if Gore would support a ban on female birth control pills given what seems pretty certain to be their impact on the environment? Naa"
That's why America don't release CO2 anymore, right? I mean, we don't, right?

Seems relevent

Why do I suspect statistics (like the ones who show no Iranian Shia killed Americans in terrorist attacks, but Russian and Saudi Sunni radicals kill Americans whenever they have a chance) wouldn't matter if the far-right could use such "statistically anomalous" tragedies as the one in Vegas to further their agenda?

How many innocent Americans have to die to make the NRA happy?

Yes, why use math when my feelings tell me so much already.

In other words, "I have not been murdered so who cares?"
We are told Iranian Shias are a threat because Russian Sunnis killed Americans, and now we are told guns don't matter because Charlton Heston didn't shoot anyone in Vegas.

At least Tyler is consistent in calling a tax cut a deferment. I believe he said the same thing years ago. Not sure if it is true but...

"For all the analyses of President Donald Trump’s tax plan, one big factor is missing for a final assessment. Once we’ve lost some revenue, which taxes will need to rise in the future? In other words, the plan is really a (less glorious) tax shift rather than a tax cut."

Yep, which is why I'm surprised Tyler (as a Libertarian) isn't harping on shrinking the size of the Federal government. But it's not a subject he spends much serious time writing about.

True, Trump is shrinking government one web page at a time.

Sept. 28, 2017 - The Treasury Department has taken down a 2012 economic analysis that contradicts Secretary Steven Mnuchin’s argument that workers would benefit the most from a corporate income tax cut.

That sounds like a trivial issue that a partisan would care about.

That is hilarious. Anyone with a gram of economics know that tax cuts have been lied into existence dozens of times. Each time economics shed light. Each time politicians ignore.

This time politicians straight up deleted.

"... have been lied into existence dozens of times. ... This time politicians straight up deleted."

So what was the point of your comment about the web site ?

Seriously if you want to debate the facts then debate the facts. This was just another partisan jab without any specificity behind it.

The web page deleted was an economic study. Was that not clear?

And they even took down the ROC flag from the web page on ROC at the State Department.

More detail

So annoying. Today, we have a $20 trillion debt and growing deficit, approaching $700 billion.

This is the BEFORE picture.

So yes, it's time for Very Serious People to get together and knit their brows over the reckless Trump plan (which sounds pretty bad, by the way.)

the answer is too hard to take responsibility for

C'mon, "$700 billion"...really?

Oops, mistook "b" for "t". But still, is a $20 "t" national debt a problem? I've seen forecasts that the debt will grow to 150% of GDP by 2047, Japan's debt is currently 239% of its GDP and it seems to be muddling along and retaining its position as the third largest economy.

Tyler is a lipstick libertarian--big on legalizing sex and drugs, enthusiastic about eliminating restrictions on restaurants on taxicabs, not really interested in taxes or 99% of government regulations, most of which he doesn't understand anyway.

Well then thank god for your deep expertise on these issues.

The tax cut will increase the spread between savings and investment so the current account deficit will increase as the foreign capital flows in to finance the larger savings-investment gap.

I wonder who Trump will blame for the enlarged trade deficit?

First honest thing you've ever said.

Well, I can be honest now that I'm unemployed. You guys were right about me, I'm just the worst.

You are the worst. It's your fault for not enthusiastically supporting me during the campaign. You are the reason I lost!

Well yes, but to be fair, you don't get to take all the credit. As you said, "you didn't create that" mess all by yourself, there were a lot of people helping you. For instance, I know somebody had to put those tons of small unmarked bills on the planes to Iran; that was a lot of work.

But looking forward, I think Hayley Geftman-Gold is now available full-time. Her last gig was in Strategic Transactions. Maybe she can do something about getting those speaking fees up where they should be.

Sure, Hillary -- Obama is the reason you lost in 2016, for sure. No question.

But you are a two-time failed Presidential candidate. How do you explain your loss in 2008?

Oh, right.... that was Obama too!

I'm just glad there's finally a president in there who can make everything better. 8 years was a long time to wait for things to get back to when they were all working well, before I showed up.

Retirement suits you well (gee, who could have guessed?) since you are definitely more self-aware these days.

This is a 100% fact: I had been on track to retire at 56, but thanks to the Trump Stock Boom, 53 is easily within range. And you've only been gone nine months!

Don't listen to these counterfeit posters. I was the best President ever. My legacy will continue to grow over time. It was the the first time that anyone of importance could be proud to be an American!

Hey Other Jim, I gave you a pretty good stock boom too, without mine you'd be retiring at 70! I'm aware that mine happened despite me, while Trump's is all because of him, but still.

Nice try BO, but you also hiked my health insurance about $3300 per year, and that was AFTER I lost my doctor and dentist and pediatrician.

But as you always said, "If you like your doctor, you can go fuck yourself."

Nice try? What do you mean, did you sell all your stocks in January of 2009? Bad call, bro.

Corporate tax cuts can more than pay for themselves:

Also taxes on 1% are not as onerous as many claim:

Plenty of places to grow the economy and raise revenue through sensible tax policy. But of course no one is serious about either.

Dan, people are saying that across all studies, cuts to corporate taxes only sometimes trigger higher reporting and tax, and that even those effects from tax cuts tail off rapidly.

Are you referring to it 'paying for itself' or the shift of taxes from corp to the owners who pay individual taxes?

I'd rather the tax cut be revenue neutral, but a steep corp cut as it is the most behavior distorting. Reagan's tax cuts did not lose revenue.

I am referring to "pays for itself," yes.

I too support revenue neutral tax reform.

It is all a gamble on Strong AI, Tyler.

Here's a blast from the past, Heritage's prediction in 2001 of what effect the Bush tax cuts would have:

Hate to say it, but Tyler's right, Trump's wrong on this one,

Why didn't the Bush tax cuts prevent the Great Recession, that's what I want to know.

NGDP crashed and no one did anything until the system almost collapsed.

It's not rocket science.

You're also mangling supply and demand side. Fed controls NGDP, full stop. That's the cyclical part.

Supply side fuck ups are : convoluted tax system which gets almost everything wrong. (Tax consumption, do not tax work or investment!) Licensing and certification for jobs which shouldn't require it, bans on food trucks, street vendors, etc. Property zoning nonsense, NLRB, environmental lawsuit racket, liability lawsuit racket, discrimination law racket, basically all of Art Decos whole lawfare complaint, minimum wage, Obamacare 29 hrs law, DoL/DoJ lawfare bs.

George W's tax cuts were stupid and irresponsible. But your insinuation is as stupid as he was/is. Not a bad painter though.

I think that detail misses the big picture. Many, many, tax cuts have been sold on a vision of "happy days" from there on out. Economic nirvana.

If tax cuts don't prevent the greatest recession in 70 years, what good are they? What do supporters believe now? Happy days?

There are economic models for tax and growth, but when the President just declares 6% .. that isn't a model. That is an appeal to "happy days"

The big picture is that politicians lie to pass rent seeking legislation??

Are you f'ing serious ?

Just shut down the legislature then. I won't complain.

Public Choice wasn't your strong suit I suppose.

"Public choice theory" was nothing more than an abandonment of moral responsibility.

Focusing on tax rates is a mug's game. It has no value in trying to reduce the size of government. It's intended to help the wealthier taxpayers pay less taxes. Taxes should be based upon the most equitable and efficient way to pay for what we decide to spend government funds on. That's it.

What we should focus on is what we are spending money on, and determining how much we really need to spend. In order to accomplish that, we need to make spending clearer. I submit that one of the benefits of a guaranteed income of some sort is that it would make it far easier to determine how much we really need to spend on what's now spread over all of G-d's green government. Plus, it would be cheaper if directed to the actually poor.

Numbers please. How many months of the year should I work to pay the bills for those who would rather not work?

6/12? 10/12? What's "equitable?" Or is this a white privilege argument where we should pay 3/4 of our income because racism.

Screw guaranteed income, that's so obviously poorly designed for incentives it would be a disaster. How about an hourly wage subsidy. If you work 40+ hrs a week, you get a subsidy? I'd pay for that, since the incentives line up.

If you don't work and are physically able to, then no $.

"If you work 40+ hrs a week, you get a subsidy? I’d pay for that, since the incentives line up"

I would support an expanded EITC, even at the cost of a direct, across the board income tax increase.

I would too JWatts.

See Charles Murray "In Our Hands".

New Jersey is a swing state?

Getting rid of tax deductibility of state taxes is really smart for Trump. It will hit blue urban professionals on the coast and mostly avoid lower tax states which voted for Trump.

Not a swing state, but it does have 5 R reps who would be in a world of hurt come next fall if this passed. Add those to the 14 Rs from CA and 9 Rs from NY, and Trump can kiss the House majority goodbye. And we haven't even gotten to the other high income tax states that have lots of Rs in the House (and even some Senators), like Iowa, Nebraska, Minnesota, and Maine.

And btw, these people know this, which means there's not a chance in hell it's actually going to pass. Trump has inserted a poison pill in his own tax plan.

Exactly. There's a fine line between clever and...stupid.

Not a poison pill, but the first bid on the final deal. Negotiation.

I see. More of those amazing negotiating skills that got him that obamacare repeal law...

I wasn't aware he really had any input on the formation of the repeal law. That was Congress' and he really didn't fight much for it.

So if state and local income tax deductibility is eliminated, then pissed off Republican voters are going to let a Democrat win ... so that the Dem can vote in lower taxes? I don’t think so.

I heartily support getting rid of this deduction because it will force rich Democrats to pay the higher taxes that they say they support.

Its not even going to get to that point. The proposal is DOA. See Peter King.

Yes. They are going to let a Democrat win. They will probably even vote Democratic.

We are not talking about red state gun-loving gay-hating Republicans. We are talking about suburbanites who vote (R) because the think their federal taxes will be lower. Vote for a big increase and you are history.

It's critical that we don't call it the "Trump Tax Cuts" because people like tax cuts and we cannot associate anything positive with Trump, ever.

However, when Category Five Morons like Bernie Sanders promote "college debt FORGIVENESS," it's critical that Ty keeps calling it FORGIVENESS, because that is a super-awesome word and we would never want to use an accurate phrase like DEBT SHIFT TO THE TAXPAYERS.

Amirite, Ty? Shall we focus our vocab-accuracy where Bloomberg wants it?

There's a third option in the college debt dilemma. Debt shift to the educational institutions.

Tax cuts are a positive?

Cut the fica tax and be rewarded by having to feed and house your parents and grandparents, plus earn less money as your retired customers eliminate 90% of their spending buying from you.


My costs are your income.

Forgive the debt incurred by students at phony for-profit colleges. Send the bill to DeVos.

DeVos' schools have done better than the public. Refund me my money for public schools

All colleges are "for profit".

Of course, the most likely outcome is neither a cut nor a shift, but nothing at all because Trump won't lead and congressional Republicans can't legislate.

more likely “Trump tax shaft. "

I voted for Trump and all I got was this lousy tax shift.

"How might the plan make up for that lost revenue? So far, the biggest revenue-raiser seems to be the elimination of the deductibility of state income taxes."

To be like Europe and Asia, deductions for labor costs are the correct way to broaden the based, cut the rate to 15%, and generate more tax revenue with a lower tax rate than Germany's and China's 17% tax rates on businesses.

Of course, that would make business taxes agree with the right-wing and GOP description of business taxes, a 35% tax on paying workers that discourages paying workers, rather that accurately describing the 35% rate business taxes as PUNISHING NOT PAYING WORKERS. Under the current tax system, the number on tax dodge is paying workers. Higher taxes on gas would all go to pay workers. Higher property taxes all go to pay workers.

Trump and the GOP want to tax paying workers by eliminating tax dodges of paying taxes to pay workers.

And I can't think of any tax that is not to pay workers. No regulation that does not require paying workers. Eliminating fica would lead to the old and disabled stopping paying workers for food, health care, housing, transportation. Not polluting requires paying workers. Overtime rules require paying workers.

Trump wants to punish paying workers, so the VAT is the best way for the US to compete with Europe and China in punishing paying workers.

Of course, Cowen is just being honest: this isn't about a tax cut, it's about tax deferral. What's more interesting is whether the Republicans will borrow (!) from the Republican's page from the 1980s and propose a payroll tax increase to "save" social security and Medicare in order to offset the income tax cuts for wealthier Americans. The Republican base is a lot dumber than in the 1980s. And besides back then they didn't have folks like Megan McArdle to explain to them that A (income tax cuts) have nothing to do with B (payroll tax increases).

yes, a tax shift. just as every dollar the government spends today is also a tax shift. cut tax expenditures like tax exemptions for educational institutions, labor unions, and 501(c) exempt political groups. cut spending cut spending cut spending. eliminate the departments of education, energy, transportation, housing and urban development. cut the social spending in defense, cut the waste in the va. cut cut cut

All those cuts you listed add up to a pretty small % of total federal outlays. Also, what is "social spending in defense"?

Ty gets more nakedly transparent by the day.

Is there anywhere other than Bloomberg that you can call New Jersey a "swing state" and not get your ass fired? Seriously?

Not a sole on this Earth takes you seriously, little man.

considering your torrent of comments on his posts, you certainly take him seriously.

If you print enough money, basic intuition says that its value would drop.

"but the main issue is cultural presuppositions about what government should and should not do. "

Are you implying that the underlying issue in "Tax Reform" is the determination of the functions of governments?

How Novel !
How on Earth did you ever come to this concept?

Like I like to say every so often: worst comment section on the internet.

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