The #GOPTaxScam has finally brought up the subject of economics into the mainstream. People are paying more attention to that dreary science. And in 95% of the stories most people hear or write about the #GOPTaxScam they are wrong about it, whether they like the policy or not. Nearly every MSM and the MSM wannabes review places the impact that the policy will have on our debt and our deficit. The other common denominators are calling the policy a transfer of wealth, or a boon to corporations. From the plan’s detractors you hear how this policy is going to crash the economy and trash the Republican chances of holding their majority in Congress. From it’s supporters you hear how the lower taxes on wealth will spur investment, add jobs, increase salaries, and maybe even balance the budget. Both sides are wrong, and even worse on many points both sides are lying.
But they also both speak some truths. The supporters note that the Middle Class especially will see lower taxes. And that is true. But it is also true that taxes on wealthy people and corporations will be lowered even more, by any mathematical measure. The detractors point out that the higher tax rates return in 2025 for the Middle Class and that the Middle Class will lose some deductions, which are not tied to inflation effectively raising their tax rates at a proportionately higher rate than on wealthy people.
Here is what that means. Initially the Middle Class and to a lesser extent, the poor will have more money to spend, businesses who already have enough reserves to meet the increased demand will likely expand, add jobs, and even increase pay. Still the vast bulk of their tax savings will go to shareholders and offshore untaxed accounts. As the effective taxes on the Middle Class increase each year, there will be slower growth until by 2025, growth will be back to our current level of stagnation. That is, unless inflation such as we have not seen since the Nixon years takes hold; and this plan puts the US at risk for that to happen.
Additionally, there will be so-called deficits. This is the lie that both sides agree on. These deficits will be used by supporters as an excuse to cut back nearly every single social benefit funded by the US government. Again, the initial boom will make it appear that the deficits are not as bad as predicted, but by after 2019 election, the deficit numbers will put pressure on Congress to impose austerity. This is an actual lie which is at the heart of the #GOPTaxScam. That initial boom potentially could kick off a round of inflation since there are no tools that I am aware of in this plan for managing that risk.
There is no deficit, there hasn’t been since Richard Nixon took us off the Gold Standard. Money is created into existence. Taxes serve two primary purposes, and neither one is to fund the federal government. Money is created by the US spending. It is not recycled as revenue, it is destroyed. When we, the users of money spend, the money is recycled so it’s value to the economy is greater that its nominal value. That is why tax cuts for the wealthy are useless, their money is not recycled rapidly if at all. But the Poor and the Middle Class spent nearly all their income. Taxes force the US Dollar to have value and be universally accepted. Taxes also remove excess money from the economy to regulate inflation. More money does not create inflation but less money slows inflation.
Last of all, there is no such thing as taxpayer money. All taxes are destroyed, not used to pay for wars, not used to pay for Presidential vacations, legislators benefits, or even your Social Security. #LearnMMT