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What Have The Tax Cuts Yielded So Far?

Pete Sepp, National Taxpayer Union

July 11, 2018 - 4:37 pm

CD: Pete Sepp, thank you for joining us. We're on with Tony Colombo and Crane Durham and this is the Annie Frey show where I get to sit in for Annie Frey who's on a well-deserved break. Pete thanks for taking the time. Tax cuts the hysteria what's so far, what have we seen from these tax cuts? What are the yielded Pete Sepp?

PS: Yeah, so far so good. When you take a look at the business confidence index, for example, small business optimism about the future, about expanding their own operations is that an all-time high since early 2017 and so of the tax cuts have contributed to that kind of optimism. The National Association of Manufacturers does a confidence index as well. They surveyed their members, and 94% of manufacturers have a positive outlook this first quarter of 2018. 90% of wage earners have received a reduction in the amount of taxes they pay so a bigger paycheck as a result of the tax cuts and jobs act. That's because withholding has decreased already. You have over 4 million individuals who have received bonuses or extra 401k deposits, or additional benefits such as child care or job training directly as a result of the tax cuts and jobs Act. This is an important point to stress Crane. There are many, many factors that go into economic growth that propel the stock market that contribute to investment decisions. These are direct results of the tax cuts and jobs act, these are employers saying hey, we got a corporate tax rate we are passing it along directly to our workers and even consumors are benefiting. Millions of customers from over 110 utilities across the country are seeing lower electric bills, because again that utilities are putting little announcements in the bills that these folks are receiving saying, hey, thanks to the tax cuts and jobs act, we're able to reduce your energy bills. These are great pieces of news that unfortunately, the naysayers would denouce and believe well, they're only temporary, they're not going to last. Well, certainly other economic policies may affect whether these benefits are going to last, but right now you cannot dispute the fact that this legislation is helping America. 

CD:What's the history of tax cuts in the way that we have seen them portrayed in the past and specifically it goes to the idea of attributing economic growth to tax increases. A lot of times we hear about Bill Clinton as one of the common myths that we've gone after in the past, Pete I realize but I want to revisit it only to get the truth out there. The idea of raising taxes actually created the Clinton boom. There's a lot more to that story and it wasn't the increase in taxes was it?

PS: No, certainly wasn't when you take a look at the fact that first George HW Bush did himself and the country no favors by agreeing to raise the income tax rate and other rates of tax, back with a budget deal in 1990, well, Bill Clinton thought that it was safe for him to do the same thing, even though the country was certainly deepened in it recession thanks to those Bush tax increases. Well, Bill Clinton thought they were just coming out of a recovery, America can afford to pay more, o, we're going to raise the income tax rate the gas tax rate subject Social Security benefits to more Federal Taxation and that actually prolonged the economic slump that we were just coming out of. We were just recovering what Clinton's first term came around. We didn't actually receive the economic boost we needed from federal policy until Bill Clinton said well, maybe I need to reverse what I was doing. Maybe these tax increases weren't working out. He certainly didn't repeal all of those tax increases, but what he did was create a new child tax credit with the help of a republican Congress and reduce capital gains tax rates on investment. He signed those into law 1997, 4 years after the tax increase that he signed into law and that set off a huge economic boom, which a company with the rise of dot-coms and tech firms led to the first budget surpluses in over 30 years.

CD: Thank you Newt Gingrich. I miss you. Yeah, I mean I, I it's it's one of the reasons I was a big supporter of Newt Gingrich and an understanding that and what it took in that legislative history, but with that, I go to tariffs and the concern over tarrifs. I am not a fan. I think it's that I understand the upset, but I think it's a bad strategy and historically it has not worked out and it causes more pain then you are getting in the sense of the relief that you look for in the way of enforcement of intellectual property rights etc. Your thoughts, Pete.

PS: I'm afraid so, Crane, and the impact is going to be direct and ver,y very immediately felt in fact we estimated that these new Automotive tarrifs that are being considered on essentially foreign cars, but when you say that, that's no longer really the definition that applies  anymore. There are many foreign labeled cars being made right here in the United States and many US labeled cars that have a lot on foreign parts on them. It's not easy to say let's slap tarrifs on foreign cars anymore cars because theres that mix of parts and ownership and manufacturing that directly affects not only US workers and  US consumers. And we estimated that on imported cars alone, again, might have US parts on them. Some of them might be assembled in the United States. The price would increase by as much as $4000 and for cars exclusively in the United States these proposed auto tarrifs could increase prices by over $1,200 per vehicle. So, this is an issue that is going to directly affect consumers. And again, it's not the same thing where Congress and enacts a law. the President signed into law, the IRS gets to do a lot of administrative rulemakings and then a year later when you file your tax returns, you'll feel the effects, no tariffs are much more immediate in their impact and we may very well see some negative outcomes, not only of the enacted tarrifs but these proposed tariffs much more quickly probably by the fall.

CD: I tried to go inside the numbers, Pete, only to be contextually an intellectually honest when it comes to the job numbers of President Obama versus President Trump. And I do see a lowering and then to a little increase in the sense of more people coming back to the labor force. Tell me the breakdown of the touting of a low unemployment number into context. Because when it was under President Obama, I thought to myself, yeah, a lot of people will continue to leave the workforce how and if that is changed over the last 2 years?

PS: Well, labor force participation is starting to tick upward and I say tick, it's not zooming upward. It's starting to climb upward and that's an important statistic, very much so. Because obviously if you have a 3% unemployment rate in an economy where there's only 50% labor force participation among adults who can work in the labor force then that's really a false statistic. It's not indicating how many people are optimistic or actually encouraged to seek jobs, who believe the opportunities are out there. You're better off, frankly having a 5% unemployment rate with a labor force participation of 75%.

CD: Yeah, so we've gotta watch that. Keep it in context, we've seen increase in business investment, you can correct me if I'm wrong Pete. And optimism in investment is a big part of that. So we'll keep looking out for it. But for information on these issues and how they impact our day-to-day lives the man on the front line NTU National taxpayer Union President Pete's Sepp, great to be with you. Thanks for taking the time.

PS: My pleasure.

CD: Take care.