The richest demographic in the US is currently those over 55. That’s why Donald Trump’s “SENIORS SHOULDN’T PAY TAXES ON SOCIAL SECURITY!” would lead to more growth than his highly overrated Tax Cuts and Jobs Act of 2017.
And here’s where it gets a little interesting. A recent editorial suggested that Trump has abandoned the tax cut plan in light of his push to cut Social Security taxes to zero. The reason for this is the belief that Social Security tax cuts would come at the expense of an extension of the Tax Cuts and Jobs Act. Let’s forget that tax cuts per se could never be a “cost,” but supposedly the Tax Cuts and Jobs Act was “the policy foundation for the strong U.S. economy before the pandemic.” That’s hard to take seriously, and that’s not an argument against tax cuts.
Rather, it is an argument for tax cuts that actually stimulate saving and investment, without which there is no growth. The 2017 tax cuts were not about economic growth, and the source of that truth can be found in comments by Phil Gramm, Steve Moore, former Rep. Paul Ryan, and others on the right: They all noted that the 2017 Trump tax cuts did not reduce the tax burden on the rich.
The editorial condemning Trump’s about-face to zero out Social Security taxes pointed out that “not all tax cuts produce the same benefits.” That is so true, and that is why extending the Tax Cuts and Jobs Act of 2017 makes little sense. Gramm et al. implicitly admitted that it was a Keynesian tax plan. A plan that seeks to broadly reduce the tax burden on low- and middle-income earners has little to do with growth, simply because low- and middle-income earners are most likely to spend the money saved in taxes, since they are low- and middle-income earners.
Good for low and middle earners, let’s cut taxes for everyone, but the genius of supply-side politics is that it’s not about consumption, which never needs to be stimulated, but about production, without which there is no consumption. This is a reminder that supply-side tax cuts make sense not when they reduce the tax burden for everyone (however laudable such a scenario may be), but above all when they reduce the burden on those who have the most.
Booming growth is achieved by lowering taxes on the rich, since they have the greatest capacity to save and invest. When saving and investment increase, producers have greater access to the capital they need to expand their investments, and with higher investment, production increases. In this case, it is useful to point out that the 55+ age group in the United States is a fairly wealthy wealth group. Zeroing out Social Security taxes will encourage saving and investment more than tax cuts for low and middle earners.
Right-wing editorials and pundits continue to argue, oddly, that Trump’s “pro-growth tax policy” is his “big advantage” over Kamala Harris. But the 2017 tax cuts weren’t very pro-growth either. Tax laws that raise taxes on the rich are, by definition, a drag on economic progress, because they increase the burden on those who are best able to save and invest. As for the corporate tax cuts included in the bill, a lower nominal tax rate was traded for the disclosure of trillions in foreign income to Uncle Sam.
As always with taxes, the goal should be to reduce federal government revenue, not to “pay” tax increases “here” to “pay” tax cuts there. Our job is not to prop up the Treasury. At the same time, if growth is the goal, growth can only be achieved by reducing the burden on the wealthy. That is, Trump’s claim that “SENIORS SHOULDN’T PAY TAXES ON SOCIAL SECURITY!” is more growth-enhancing than the 2017 Keynesian tax cuts imposed on him by Paul Ryan.
