With the recent announcement of Wal-Mart’s increasing starting wages and Fiat Chrysler’s opening a new plant (with 2,500 jobs) in Michigan, there are now more than a hundred companies that have offered bonuses and benefit hikes to their workers due to the tax cut. An estimated 1 million workers have benefited. This after less than one month.
Liberals disparage all of this as a “publicity stunt.” To hundreds of thousands of families, this is a wonderful stunt, and let’s hope to see a lot more examples of it in the weeks and months ahead.
The stock market has reached multiple new highs since the tax bill took effect on Jan. 1. Workers are more optimistic about the job market than any time in at least a decade.
I helped work with candidate Donald Trump to refine this tax reform plan, and I was ridiculed as too optimistic on how it might help the economy. But already Trump’s economic accomplishments have managed to exceed my lofty expectations. The tax cut isn’t the only factor here, but you’d have to be wearing ideological blinders not to see a link.
We are also learning that taxes influence how politicians behave. Blue state governors have argued for many years that their high tax rates don’t cause people to move – even though two of the highest income tax states, California and New York, have each lost about 1 million residents to other states over the past decade.
But now that their high tax rates are no longer tax deductible, the incentive to leave is magnified, and these governors, such as Gov. Andrew Cuomo of New York, are leaping into action. Some are examining whether they can convert their income taxes into payroll taxes (which could be deductible off federal taxes as a business expense for employers) as a way to preserve federal deductibility. Some are even threatening to sue the federal government, as if this tax deduction were a constitutional right.
California and New York officials are investigating whether their states can convert income tax payments into tax-deductible charitable contributions to the state government. Good luck with that.
Why would they go to all this trouble if taxes didn’t matter to constituents?
Then there are the charitable organizations – including the Catholic Bishops – complaining that the doubling of the standard deduction will lower donations to charitable causes, because far fewer people will deduct gifts from their taxes. Steve Taylor, vice president of the United Way, argues that charities are subject to the old adage: If you tax something, you will get less of it.
Well, yes, every politician in America should hold that thought – especially when they contemplate higher taxes on work, profits, savings and so on. But in this case, higher growth from lower tax rates is likely to lead to more income, and thus more, not less, charitable giving – just as we saw in the 1980s when tax rates fell from 70 percent to 28 percent.
The timeless economic lesson here is that taxes profoundly influence how and where we live our lives. We tax cigarettes and booze because we want people to consume less of them. There are proposals all over the country to tax soda pop, sugar and carbon emissions so we consume or produce less of them.
So why is it so hard to accept the reality that if we lower taxes on virtuous activities – work, investment, starting a business or saving for retirement – we will get more of these? And why is anyone surprised that this is already starting to happen?
By the way, government officials in China, Mexico, India and much of Europe are angry about America slashing its corporate tax rate from 35 percent to 21 percent: That giant sucking sound is capital and jobs from all over the world coming to low-tax America.
Meanwhile, Democrats in Congress – every one of whom voted against the tax bill – keep running around the country saying that their top agenda item, if they win the midterm elections, is to repeal this policy that is already creating jobs. Wouldn’t it be wonderful if they started rooting for America rather than against it?