Everybody Joins the Party
All 3 of the major U.S stock indexes closed out the week at new record highs as it became apparent that the new tax cut deal was pretty much done. Marco Rubio, who had been a hold-out, caved and even Corker, the one Republican who was going to vote against the bill becase it was going to increase the deficit, decided to join the party as well. He’s now a yes, so the bill is going to pass.
Plan Riddled with Loopholes
We didn’t get the compromise details until later Friday afternoon so I am recording this podcast Saturday morning. The new top rate: 37%, bottom rate: 10%. But of course, that 37% rate is probably not going to be paid by nearly as many people as the government thinks, because this plan is riddled with loopholes. In fact, I believe, if this plan passes, we will have a tax code that is more game-able where more people are doing more things to rig the system or exploit the loopholes – not that there’s anything wrong with that – that’s every American is going to do. No American is under obligation to pay more taxes than what is owed. And to the extent that you can re-arrange your affairs, such that you pay the lowest possible tax, that’s what everybody is going to do.
Reduced Deficit Projections is Nonsense
And that is why the Republican projections that this is going to add just $1.5 trillion to the deficit over next 10 years are a bunch of nonsense. I’m sure that it will add more than twice as much over the next 10 years above how much the deficit is going to grow anyway during those 10 years. Now, the Republicans try to claim that even though on paper this bill will add $1.5 trillion to the deficit, it won’t really be that big, because these tax cuts are going to create all this extra economic growth, which will result in additional tax revenue. So if you factor in that additional revenue, some kind of dynamic scoring, then the impact will not be as large. That is all a bunch of nonsense.