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When Republicans in Congress passed a big, fat tax break bill in December, they insisted it meant American workers would be singing "Happy Days Are Here Again" all the way to the bank. The payoff from the tax cut would be raises totaling $4,000 to $9,000, the President's Council of Economic Advisers assured workers. But something bad happened to workers on their way to the repository. They never got that money.
In fact, their real wages declined because of higher inflation. At the same time, the amount workers had to pay in interest on loans for cars and credit cards increased. And, to top it off, Republicans threatened to make workers pay for the tax break with cuts to Social Security, Medicare and Medicaid. So now, workers across America are wondering, "Where's that raise?". It's nowhere to be found.
The U.S. Bureau of Labor Statistics reported this week that wages for production and nonsupervisory workers decreased by 0.1 percent from May 2017 to May 2018 when inflation is factored in. The compensation for all workers together, including supervisors, rose an underwhelming 0.1 percent from April 2018 to May 2018.
That's not what congressional Republicans promised workers. They said corporations, which got the biggest, fattest tax cuts of all, would use that extra money to increase wages. Some workers got one-time bonuses and an even smaller number received raises. But not many. The group Americans for Tax Fairness estimates it's 4.3 percent of all U.S. workers.
The New York Times story about this record breaker describes the phenomena this way: "Companies buy back their shares when they believe they have nothing better to do with their money than to return capital to shareholders." So despite promises from the GOP and the President's Council of Economic Advisers, corporations believed further enriching their own executives and shareholders was a much better way to use the money than increasing workers' wages--wages that have been stagnant for decades.
(Score: 5, Informative) by digitalaudiorock on Thursday June 21 2018, @10:36PM (31 children)
In fairness, there is some stuff there that can tend to help the working class...primarily the increase in the standard deduction. HOWEVER...not so much if you happen to live where you have notable state, city and/or property taxes ("coincidentally" mostly blue states) and were itemizing...since you're now very limited in that deduction. This trend also punishes states that tend to actually pay their own way...thank you very much.
As if history hasn't given us enough proof that trickle down doesn't work, I'd say there's a new reason at play here: We're supposed to believe that the lower corporate tax will increase jobs and help the economy via more corporate spending. That is, the "We would hire those 1200 new people, but our corporate income tax is too high!" theory. Oddly enough, the exact opposite can and does occur. That is, higher corporate taxes can cause companies to spend more to chip away at those taxable profits! Lower corporate taxes can create an incentive to actually keep those profits. Our company has actually seen this first hand, as more than one prospective customer has told us exactly as much. Interesting.
(Score: 2) by digitalaudiorock on Thursday June 21 2018, @10:42PM (21 children)
OH...and one thing that really unnerves me is the BS fed to people about their paychecks regarding the withholdings going down and their checks "getting bigger". FFS...that's just a matter of fucking with the W4 rules used for the withholding amount and is meaningless by itself until you see how it nets out with your refund or payment. That's just playing on people's ignorance.
(Score: 3, Insightful) by slinches on Thursday June 21 2018, @11:02PM (20 children)
I calculated my net tax liability with the updated tax brackets and deductions and the reductions in withholding match that quite well. I suspect that's the case for most people, like me, who take the standard deduction or had itemized deductions that were close to it. So, I don't think the "bigger paychecks" are deceptive at all for most people.
(Score: 5, Informative) by NewNic on Thursday June 21 2018, @11:06PM (19 children)
That depends a lot on which state you live in. In high state income tax states such as CA, a lot more people (myself included) will pay more in Federal tax.
The tax "cut" was cynically designed to benefit:
1. Very wealthy people by a large amount
2. Ordinary people in red states by a small amount.
lib·er·tar·i·an·ism ˌlibərˈterēənizəm/ noun: Magical thinking that useful idiots mistake for serious political theory
(Score: 2) by slinches on Thursday June 21 2018, @11:43PM (6 children)
While I don't doubt that the impact of capping the SALT deduction wipes out any benefit for well off people in high-tax states. I think you're underestimating the benefit to most ordinary people in low tax states. For people who have incomes that fall into the middle class range and take the standard deduction, their tax liability was cut by 20-30%. That seems like a pretty large benefit to me.
(Score: 2) by NewNic on Friday June 22 2018, @12:11AM (4 children)
30% of what, though?
lib·er·tar·i·an·ism ˌlibərˈterēənizəm/ noun: Magical thinking that useful idiots mistake for serious political theory
(Score: 2) by slinches on Friday June 22 2018, @12:16AM (3 children)
30% of their 2017 tax liability assuming their gross income didn't change.
So those who paid 10k in taxes in 2017 are paying 7k this year.
(Score: 2) by Whoever on Friday June 22 2018, @02:27AM (2 children)
And people who paid $1k last year are getting a $300 tax cut.
Percentage alone tells you nothing.
(Score: 2) by slinches on Friday June 22 2018, @05:03AM (1 child)
Someone only paying $1k in taxes last year is probably at a much higher percentage. I'd have to re-run the calcs for that case, but they might not be paying any tax at all this year with the same income.
Although, with unemployment down, maybe they will end up paying more because they found a much better paying job.
(Score: 3, Interesting) by slinches on Friday June 22 2018, @04:41PM
Just re-ran those calcs. If someone filed single last year and paid $1k in taxes, they would pay about $440 this year and would owe no taxes if they joint filed.
(Score: 2) by slinches on Friday June 22 2018, @12:30AM
Just to add to this. From what I can find, recent history indicates that people in the situation I was describing represent ~70% of the taxpayers (i.e. ~30% of filers choose to itemize)
(Score: 2) by digitalaudiorock on Thursday June 21 2018, @11:44PM
Exactly...same here in New Jersey, where working class home owners' biggest expense can be their property tax. They get screwed in this one for sure.
(Score: 3, Interesting) by bobthecimmerian on Friday June 22 2018, @01:39AM (10 children)
My wife and I have four kids, so the axe on exemptions hurts. Even with the new larger standard deduction and new lower tax bracket percentages my tax liability went up. I caught the ugly end of the income curve, if our gross household income was $50k lower we would be ahead a few thousand per year and if it was $50k higher we would be ahead more than five thousand per year. But as it is, nope.
(Score: 0) by Anonymous Coward on Friday June 22 2018, @11:27PM
You know, I think they can reverse vasectomies these days.
(Score: 2) by JoeMerchant on Saturday June 23 2018, @01:37PM (7 children)
Welcome to the shrinking middle - which side will you be leaving on? If you're like the majority, it won't be the high side (as you might have guessed by your increased tax bill...)
🌻🌻 [google.com]
(Score: 2) by bobthecimmerian on Sunday June 24 2018, @04:27PM (6 children)
I misread the terms of the 2018 tax changes. I do have my tax liability drop substantially. I wrote about it here: https://soylentnews.org/comments.pl?noupdate=1&sid=26245&page=1&cid=697595#commentwrap [soylentnews.org] I apologize for the misinformation.
(Score: 2) by JoeMerchant on Sunday June 24 2018, @06:32PM (5 children)
Care to share how much?
I'm curious about effective tax rate pre-post changes.
My tax situation changes enough year to year that it's hard to tell what is from the law change and what is from our personal circumstances.
🌻🌻 [google.com]
(Score: 2) by bobthecimmerian on Monday June 25 2018, @02:19AM (4 children)
So with your taxes, there are two different things to look at. You probably know this, but I want to be clear to any reader. Your gross income is the household income. Your taxable income is the portion of your gross income that will be taxed. There are deductions and exemptions, which lower your taxable income. And there are , which lower the amount of tax you owe. So say you have $100,000 in gross income, $15,000 in deductions and $3,000 in credits. Then the tax you owe would be calculated based on an taxable income of $100,000 - $15,000 = $85,000. Let's say that tax number came out to $11,000. You would subtract the $3,000 in credits, and you would actually owe $8,000.
My wife and I have jobs and we have four kids under the age of 18.
Under 2017 law our taxable income was gross household income - (itemized deductions or standard deduction) - (personal exemptions). The standard deduction for married filing jointly was $12,700 and our itemized deductions were $18,000, so we used itemized deductions. The personal exemption are $4,050 per person in the family, so $24,300. So our taxable income was gross income - $42,300. The child tax credit is $1,000 per child, but if your taxable income exceeds $110,000 the child tax credit is reduced. So we didn't get a $4,000 tax credit for our four kids, we got a lot less.
Under 2018 law our taxable income will be gross household income - (itemized deductions or standard deduction). Personal exemptions are gone. The standard deduction for married filing jointly was raised to $24,000. This year our itemized deductions won't exceed $24,000. So we'll pay tax on gross income - $24,000. Even with the new lower tax rates, our total tax liability goes up slightly because of the $18,300 in deductions and exemptions we lost. The extra income tax will be roughly $1,000.
But I missed that part of the 2018 tax changes are that the child tax credit doubles to $2,000 per child and the threshold for having the child tax credit reduced was raised from $110,000 to $400,000. So instead of getting some fraction of $4,000 as a tax credit in 2017, in 2018 we will get all $8,000 in credit. So our 2018 tax liability will go down more than $5,000. That doesn't count any raises I get this year or anything else that changes our income, of course.
(Score: 2) by JoeMerchant on Monday June 25 2018, @10:44AM (3 children)
So, we're increasing the reward for children, (weakly) encouraging people to increase the population, as if we don't have enough people on the planet already.
We've got two kids and fall in that 110-400 range, so I'm guessing we get a net benefit, too - even though we're on standard deduction instead of itemized. Turbotax will tell all...
🌻🌻 [google.com]
(Score: 2) by bobthecimmerian on Monday June 25 2018, @01:28PM (2 children)
My annual expenses for each child grossly outweigh a $2,000 per child tax credit, so I think at best we're making parenthood a hair less brutally expensive. That's not much of an encouragement.
Of course, we could solve two problems at once by dumping the child tax credits in the tax code and allowing more legal immigration. Then you get population growth without adding to the world population. But this is the US, and it appears that 40+ % of the voters only want immigrants from central, northern, and western Europe.
(Score: 2) by JoeMerchant on Monday June 25 2018, @02:13PM (1 child)
Kids are as expensive as you let them be, and I doubt that many people factor in the child tax credit when they decide to use protection or not... but still, I'd rather remove all direct "parenthood benefits" paid to anyone who can claim dependents and instead reduce the costs of doing a good job raising your children directly, starting with reducing the cost of a good education and healthcare. Take that $36,000 per head and put it straight into free university for kids with acceptable GPAs, and other meaningful life-skills programs for kids without acceptable GPAs. Oh, right, I'm behind the times: $30K per head ($7500 per year) was the cost of a BS degree when I entered university in 1984, by 1988 that same university had hiked tuition to $60K.
Haters of different skin colors are still legion, we need another couple of generations of social adjustment to reduce that to non-significant levels, and at present I think we're doing a little backsliding on the issue.
🌻🌻 [google.com]
(Score: 2) by bobthecimmerian on Monday June 25 2018, @03:36PM
Agreed on all points. Except I went to college in the 90s. :)
(Score: 2) by bobthecimmerian on Sunday June 24 2018, @03:55PM
GODDAMNIT! I posted bad information. I didn't realize the threshold for the high-income phaseout of the Child Tax Credit changed with the tax code changes. I'm wrong, we do save big with the tax cuts because in 2017 our > 110k gross household income cut the $1,000 tax credit per child down to $300 total. In 2018 the $2,000 tax credit per child doesn't get reduced until the gross household income is above $400k. That's not an income level I'm lucky enough to have, so even though our gross tax liability goes up $500, once you factor in the additional $7700 in child car tax credits our net tax liability is down $7200.
I hate spreading misinformation, I wish I had a way to annotate the previous post as withdrawn/incorrect. I apologize.
(Score: 0) by Anonymous Coward on Thursday June 21 2018, @11:32PM (5 children)
Isn't trickle down economics the entire basis for the federal reserve system? They make it cheaper for the biggest banks in the US to borrow money and hope this trickles down to everyone else?
(Score: 2) by Thexalon on Friday June 22 2018, @01:52AM (4 children)
Whether or not it's the theory behind the Federal Reserve:
Starting in 2008, the Federal Reserve lowered interest rates as far as they could possibly go in an effort to counteract the financial crash and resulting crash of the "real economy" (production and distribution of goods and services, rather than the financial manipulations of Wall Street and commodities markets). The hope was that the banks would lend out money more easily, which would stimulate demand for goods and services purchased using those loans, and that increased demand for goods and services would in turn get more people back to work producing the goods and services in question.
That action was probably better than doing nothing as some European banks tried to do. But it was also of limited value because a lot of the banks in question took the money they were borrowing from the Federal Reserve and used it to buy US Treasury Bonds rather than take on the risk of loaning it. In short, the money didn't "trickle down".
The only thing that stops a bad guy with a compiler is a good guy with a compiler.
(Score: 0) by Anonymous Coward on Friday June 22 2018, @05:57AM
Interesting, seems like something to be concerned about...
(Score: 0) by Anonymous Coward on Friday June 22 2018, @07:22AM (1 child)
Remember that the banks in question would have loved to extend loans, if they could have.
First: loan regulations were tightened in the wake of the sub-prime thing.
Second: banks were under a lot of pressure to increase their reserve ratios so that they could pass stress tests.
Result: they had to get reserves, not loans, despite Congress thumping tables and looking angry. Politically inconvenient? Sure. But the alternative was not being banks any more. Huzzah for unintended consequences.
(Score: 2) by HiThere on Friday June 22 2018, @06:22PM
It's not a simple problem. Some of the banks were illegally loaning more money than they were allowed to. (They're only allowed to lend a certain percentage more than they actually have.) When people started looking, they started trying to get legal quickly. But the problem was because they weren't legal to start with.
OTOH, it's also dubious when you say "the banks would love to lend money", because those are individual transactions. Corporate entities don't have a centralized consciousness. It would be fair to say "The managers of those banks would love to lend money", but that's not really true, because the managers don't do the individual transactions. They set policies that encourage particular actions, which aren't always the ones that they intend, and they don't always check carefully exactly what actions result. You could say this means that they are incompetent as managers, but they've got lots of other things that they need to do, and those they are supervising will sometimes hide their actions. (Did the Wells Fargo managers know that invalid accounts were being opened? Or did they just set up conditions that encouraged that? And is "just" appropriate in that prior sentence?)
When perverse incentives are created, perverse actions tend to result, even when those actions were ostensibly discouraged. But I don't know of a financial system around (I'm no expert, of course) that isn't full of perverse incentives.
Javascript is what you use to allow unknown third parties to run software you have no idea about on your computer.
(Score: 0) by Anonymous Coward on Friday June 22 2018, @04:23PM
So are you for or against the federal reserve system, which you seem to recognize is based on trickle down economics?
(Score: 5, Informative) by Thexalon on Friday June 22 2018, @01:30AM (2 children)
Trickle-down was always a lie. Not a mistake, not an incorrect theory, but something that was known by the people promoting the idea to be complete nonsense.
The Reagan administration came into power with a very clear goal: Eliminate as many federal government programs as possible, especially Social Security, Medicare, and Medicaid. This wasn't because these programs were unpopular, but because the people who had financially and politically backed Reagan's campaign hated paying for them and hated their very concept as socialism gone haywire.
Enter Grover Norquist and Americans for Tax Reform, longtime allies of Reagan going back to his days in California: Norquist reasoned that they could get rid of these programs by doing the tax cuts first without getting rid of the popular programs they wanted to eliminate, drive up a massive deficit, and then the Republicans could go to the public and say "We wanted to keep grandma's Social Security, but the budget unfortunately required that we cut back on it. Sorry, but it's the only responsible thing to do." So far, so good.
But that created a second problem of Democrats like Tip O'Neill saying "Wait a second, you were the ones being irresponsible by making all these crazy tax cuts." Enter Arthur Laffer, who with a vague diagram drawn on a paper napkin put forward the argument that tax cuts would actually increase government revenues (even though that had never happened), and now they had the answer to complaints about irresponsible tax cuts.
But then a third problem came along: The tax cuts would be most dramatic for the rich, in part because their taxes were the highest, and in part because they were the ones who had funded Reagan's campaign and wanted return on their investment. Which folks like Tip O'Neill could again point out seemed more than a bit unfair and corrupt. Enter David Stockman with his "supply-side" ideas, which he would later admit was, in essence, "trickle-down economics" (the term was coined by Will Rogers, and was definitely not intended as a compliment). This provided complex-sounding and technical-sounding reasons why the tax cuts for the rich would benefit everybody else, even though again that didn't and hasn't matched reality. But it seems like it ought to work, and that's enough to convince enough people that skewing tax cuts to the rich is totally reasonable and OK.
The whole thing is lies piled upon lies, with the ideas consistently failing any kind of empirical test they face. And the reason you know the promoters of those ideas aren't honest is that whenever their idea fails to match reality, they don't say "Whoops, we were wrong, back to the drawing board to figure out something better". Instead, they get nice salaries from think tanks and go around continuing to talk about their ideas and pretend like they all work perfectly. And one reason I know that is that I got to hear Arthur Laffer giving his spiel 20 years later - and he went on for an hour providing exactly zero data for any of his claims, mostly because there isn't any. And he didn't supply any evidence in the Q&A afterwords either that might bolster what he was saying, again because there isn't any. That's not a guy looking to get the right answer, that's a propagandist dressed up like an academic.
The only thing that stops a bad guy with a compiler is a good guy with a compiler.
(Score: 1, Informative) by Anonymous Coward on Friday June 22 2018, @02:34AM
Yup. It's called The Two Santa Claus Model [wikipedia.org]
It dates to 1976.
In addition to tax-and-spend Democrats, there were now borrow-and-spend Republicans who cut taxes, mounted up debts, and, as soon as the Ds got power, the Rs squawked about those debts (which the Rs had run up).
Arthur Laffer, who with a vague diagram drawn on a paper napkin
It was just thought experiment.
There was no actual data set.
There has NEVER been an example of Trickle Down working.
In fact, when the marginal tax rate on the billionaire class goes below 50 percent, the economy begins a decline that ends in a crash.
-- OriginalOwner_ [soylentnews.org]
(Score: 5, Informative) by captain normal on Friday June 22 2018, @03:12AM
"This election was lost four and five and six years ago not this year. They dident start thinking of the old common fellow till just as they started out on the election tour. The money was all appropriated for the top in the hopes that it would trickle down to the needy. Mr. Hoover was an engineer. He knew that water trickled down. Put it uphill and let it go and it will reach the dryest little spot. But he dident know that money trickled up. Give it to the people at the bottom and the people at the top will have it before night anyhow. But it will at least have passed through the poor fellow’s hands. They saved the big banks but the little ones went up the flue."
Will Rodgers---Nationally syndicated column number 518, And Here’s How It All Happened (1932), as published in the Tulsa Daily World, 5 December 1932.
https://en.wikiquote.org/wiki/Will_Rogers [wikiquote.org]
Everyone is entitled to his own opinion, but not to his own facts"- --Daniel Patrick Moynihan--