The WSJ is good about bringing in opposing views on its opinion page. Recently Alan Blinder had a headline of: Almost Everything Is Wrong With The New Tax Law. We were curious as we have supported it. We first checked to see his background: Professor of economics at Princeton and former vice chairman of the Federal Reserve. The first qualification makes us nervous about his seriousness but it is probably worth reading.
If you are trying to convince the unconvinced then you start with your best shot. Here is how Alan starts with specifics after saying it offers mere crumbs to the middle class:
Further, once the phase-outs occur at the end of 2025, even most of the crumbs disappear. The Tax Policy Center estimates that the share of tax cuts accruing to the top 0.1% of taxpayers will rise from 8% in 2018 to an astounding 60% in 2027 if Congress doesn’t extend the expiring cuts. [Emphasis added]
So, Alan is telling us they should extend the tax cuts. We agree. In addition he slays his “mere crumbs” argument. The top 0.1% of tax payers get 8% of the benefits in 2018. We can’t find an exact figure for the percentage of tax paid by the top 0.1% but we estimate it at 19%.
Sidebar: The top 1% paid 38.1% of income taxes in 2012. Comparing the top 0.1% taxable income versus the top 1% in table 3 shows it to be about half. Another table shows that the tax rates for the top 0.1% are slightly lower than the top 1%. So 38 percent multiplied by a half is a reasonable approximation. End Sidebar.
So folks the super-rich folks paying 18% of taxes get 8% of the benefits. We would have liked to see the tax cut be more pro growth but Alan winning the argument against himself. Next he goes for the trickle down slur and then he complains about process. In between he brings up a real issue: The deficit. We agree. It needs to be fixed. Part of the fix is increasing economic growth through tax policy and regulation reductions. Another part is reforming entitlements. We expect Alan’s support as entitlements will come up soon.
Alan convinces that we should continue to support the new tax bill and the provisions should be extended. It is not perfect but it is a good start.