Tuesday, December 26, 2017

Comparing Trump Tax Cuts With Reagan Tax Cuts

President Ronald Reagan and David Stockman
President Trump claims that his tax reform plan includes the greatest tax cut in history.
This tweet, I'll explain with a word first used in the 15th century because it applies in so many ways in this 21st century age of the tweet. It is pure trumpery.

The antidote to government finance trumpery is former Reagan budget director David Stockman. He writes:
[T]he Reagan tax cut averaged 4.0% of GDP over a decade and was predominately focused on supply-side incentives via a 25% marginal rate cut for individuals and a giant business cut. The latter would amount to $300 billion per year at today's economic scale, and, crucially, was also tightly linked to CapEx via the 10-5-3 depreciation incentive for new plant, equipment and technology purchases.
By contrast, the current GOP Tax Cut is just one-tenth the size (o.4% of GDP) of the Reagan cut over the next decade and has virtually no supply-side incentives at all.

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