When you think about who would ultimately benefit from a plan to cut the payroll tax in the interest of averting an economic slowdown ahead of an election, it’s pretty clear that such a move wouldn’t be Donald Trump’s first choice when it comes to additional stimulus.
Trump is all-in when it comes to handing out free money to the wealthy and corporations, but all bluff when it comes to the middle class, as we saw ahead of the midterms when he blindsided Republicans by announcing an imaginary 10% tax cut for middle-income families, a plan that unsurprisingly never materialized.
A payroll tax cut would benefit middle-earners, which almost by definition means Republicans won’t go for the idea, and will suddenly decide to care about the deficit again in the course of opposing it on Capitol Hill. That, in turn, means nobody should get too excited about the prospect of such a move, despite all the press it’s received since Monday evening, when the Washington Post first suggested the White House is considering it.
Read more: Trump, Fearing Economic Downturn, Ponders Payroll Tax Cut To ‘Arrest Slowdown’
In remarks to reporters on Tuesday afternoon, Trump said he’s always looking at tax cuts, but was quick to insist that the economy doesn’t need them. “[The US] is very far from a recession”, he said. And he’s probably right, which makes one wonder why he’s so obviously concerned. Even if you take the yield curve to be an infallible indicator, history shows the recession still won’t show up until after the election.
In any event, there’s another reason to think Trump probably wouldn’t go for a payroll tax cut – namely, it’s not likely to garner enough publicity. “President Obama didn’t get credit for several tax cuts including a temporary reduction in the payroll tax”, Bloomberg recalls, on the way to quoting Dean Baker, a senior economist at the Center for Economic and Policy Research, who suggested that Obama would have been better off just sending checks in the mail as W. did. Of course, it could be that Obama was more interested in helping people than publicity, but we’ll just leave that for now.
For what it’s worth, Obama’s payroll tax cuts did help families. “The median household income in 2009 was $49,777 [so] lowering the tax rate by 2% reduced the tax burden for the median family by $996”, Politifact wrote of Obama’s cuts in 2011. “As for mean household income, it was $67,976, meaning that the 2% payroll tax cut would have left $1,360 extra in the pockets of the average family”.
Trump, though, is more interested in “big league” numbers, like the billion or so he and his family are rumored to have saved thanks to the tax cut he crammed through in 2017.
That’s why it comes as no surprise that, during the same remarks to reporters on Tuesday, he brought up indexing capital gains to inflation again.
“We’ve been talking about indexing for a long time”, the president said.
It’s true, he has. And we’ve covered it every, single time it’s come up, including less than two months ago, when reports suggested the administration was once again looking to move ahead with the idea, even if it meant going around Congress.
As a reminder, the indexing idea would effectively amount to a $100 billion windfall for the wealthy, and the notion of doing it without the approval of lawmakers is something the late H.W. Bush considered, but ultimately scrapped when the Treasury Department advised the White House that redefining ‘cost’ by regulatory fiat was probably illegal.
Read more: Trump Plans $100 Billion Middle Finger To Middle Class With Possibly Illegal Tax Break For The Rich
Illegal, maybe, but that’s never stopped Trump before, which means when it comes to what kinds of tax cuts you might expect to get from the administration if the president becomes really worried about the economy, indexing capital gains to inflation would check a lot of boxes: Trump wouldn’t necessarily need Congress, the move would disproportionately benefit the wealthy and Republicans would love it. (Stephen Moore and Larry Kudlow both support the idea.)
“Many people like indexing and it could be done very simply”, Trump reminded everyone on Tuesday. “It could be done directly by me”.
The funny thing is that after a 10 year bull market, portfolios are stuffed with taxable gains, and indexing capital gains taxes to inflation would likely trigger a bunch of selling.
so much for the postcard
First off, you have to come to grips with how inflation is measured and understand the methodology used to acquire flawed nonsensical data. The Bureau of Labor Statistics & USDA among others, compile massive amounts of noise to create inflation data, which connects to CPI and spills into all sorts of fun stuff like cost-of-living adjustments ( COLA s) for Social Security benefits, etc., etc. Etc….
Now a short blurb about how those agencies search for inflation metrics, using a wonderful service called Nielsen Homescan.
“Panelists are hired to scan the barcodes of products they buy. They send this info to Nielsen to help build consumer data. The scanning is done with either a scanner provided by the company or via a smartphone app.
Nielsen HomeScan Consumer panelists accumulate points for scanning items they buy. These points are exchanged for various rewards. You’ll learn more about the rewards system below — potential prizes, how long it takes to earn them, and more. Panelists are also entered into sweepstakes for additional rewards.”
With that in mind, fast forward here: Redesign Options for the Consumer Expenditure Survey (2011)
Comparisons between estimates based on CE and the Personal
Consumption Expenditures (PCE) data from the National Accounts suggest
deterioration in the quality of the CE data, especially over the past decade (e.g.,
Slesnick 2001).
The source of this increasing disparity between the two data
sources is often attributed to measurement error. For example, persons
interviewed by telephone for the CEI have higher family income, but have similar
levels of expenditures as those interviewed in person (Safir and Goldenberg
2008; McGrath 2005) suggesting differential underreporting as a function of
mode. In the CED, empirical data indicate declines in reports of expenditures
across the reporting period (Silberstein and Scott 1991) … etc…
https://www.bls.gov/cex/redwrkshp_pap_abtsrbirecommend.pdf
==> Although that’s all somewhat abstract, defining inflation and how it is characterized, sets up a fine example as how the word cost can be defined, abused or characterized, in terms of how one might alter tax code. It’s bad enough that inflation and CPI are literally an insane long-running joke (do some homework if you have the time) but to use trump bankruptcy tactics to adjust tax code fits right into how America can be made into the greatest bunch of fools to ever have lived!
“The most convincing argument against this redefinition of “cost” is that it could not legally be limited to capital gains: “the department would have to make decisions about what types of assets would be indexed and…it would essentially be picking winners and losers…. [C]harities and other entities could sue the Treasury Department if it tried to make the change.”
https://thefederalist.com/2018/08/02/rule-executive-order-also-bad-trump/
This was also said, back when bush was tinkering with stuff:
The most convincing argument against this redefinition of “cost” is that it could not legally be limited to capital gains: “the department would have to make decisions about what types of assets would be indexed and…it would essentially be picking winners and losers…. [C]harities and other entities could sue the Treasury Department if it tried to make the change.”
An important point in defining the word cost, is to also define inflation and realize that the means used to collect consumer data is highly outdated and so flawed that t has to be the least talked about joke ever to be played on America — it’s sort of like a bureaucratic equivalent of 9/11 on steroids mixed with Fentanyl.
You have to first come to Jesus and realize that the data behind inflation, is gathered by Nielsen Homescan, for Bureau of Labor and USDA, who all collectively pay people to scan their consumer purchases: “Join Nielsen Home Scan Consumer Panel and you can earn valuable points which are redeemable for electronics, household items, and more!” However, the biased, disconnected chaotic noise they gather is the core means to understand and identify inflation in America (and other countries).
As a random example, the 2011, Redesign Options for the Consumer Expenditure Survey, stated, “Comparisons between estimates based on CE and the Personal
Consumption Expenditures (PCE) data from the National Accounts suggest
deterioration in the quality of the CE data, especially over the past decade (e.g.,
Slesnick 2001).”
The source of this increasing disparity between the two data
sources is often attributed to measurement error.
This is a very deep and dark rabbit hole to go down, but the point here, is that if trump and his mafia punks want to reinvent the word cost to use it for tax code distortion, to distort the indexing of inflation — then, it’s really a good idea to learn about the bigger picture related to this circus and understand why the clowns all need to be put in cages!