Looking at the first 10 months of the 2017-2018 fiscal year (thru July), the results reflect that the tax and jobs bill is paying for itself mainly as a result of increased revenues from taxpayers, the result of more people working, at higher compensation levels, thus offsetting the decrease in the individual tax rates and the lowering of the corporate and pass-through rates. Over this period individual income and payroll taxes increased by 5 percent, or $105 billion. The increase was made up of withholding from workers’ paychecks, which increased by 2 percent or $32 billion, despite the fact that the new withholding tables provided for lower withholding as a result of the lower rates, and estimated income tax payments and payroll taxes, which rose by 16 percent or $79 billion. Corporate income taxes fell by 28 percent, or $66 billion.
The premise behind the tax and jobs bill was that it would result in an increase in economic activity and as a result the decrease in corporate tax revenues would be offset by the gains in tax collections resulting from increased employment, increased salaries and benefits, and increased small business and investment revenues. As these numbers demonstrate, that has proven out. Employment has reach record highs and unemployment (particularly in minority communities) has reached record lows — highs and lows not seen in decades. Further, salaries and benefits have increased by over 5 percent year over year, and will continue to grow as the tight labor market continues in the economic expansion, which will also grow corporate income and result in increased corporate taxes.
The response of the California Legislature has been to see if that can create a gimmick to shield rich Californians from the limitation on state and local tax deductibility — a limitation that affects approximately 10 percent of Californians, the upper 10 percent. The people California has been taxing at one of the highest rates in the U.S in its effort to “tax the rich so that they pay their fair share,” and that the Democrats nationally have been asserting are not paying their “fair share.” The lesson being that it’s OK for California to tax our “rich,” but not the federal government. You cannot make this stuff up.
It’s time for our Democratic friends to acknowledge that the Tax and Jobs bill is working and has achieved what the Republicans (including Congressman Knight) said it would. The dispute between Democrats and Republicans is not about whether we help the poor, but about how we do so — by creating the conditions for a vigorous economy that offer all of our citizens the opportunity to be employed and to improve their place in society, or by enacting “benefits” that stifle the economy, and make it difficult for the poor to not only find a job but to improve their condition through work and effort.
For those who are wondering about the source of this information, it is the Congressional Budget Office.