Every since the late 2010s, the US fiscal situation has become unsustainable. Unless dramatic changes are made, we are eventually headed toward a major problem (sharp tax increases, high inflation, or default.) Now it seems as though dramatic changes are going to be made—albeit in the wrong direction. Here’s Bloomberg:
The back-and-forth over taxes has escalated in recent days. In an interview with CBS News over the weekend, Republican vice presidential nominee JD Vance tried to outflank Democrats by floating a $5,000-per-child tax credit — $3,000 more than the size of the current credit and even larger than President Joe Biden has proposed.
Harris, rallying supporters in Nevada, endorsed a version of Trump’s own promise to exempt tipped wages from taxes. . . .
Trump has also proposed ending the tax on Social Security benefits entirely, replacing current policy that gives targeted tax breaks to lower-income seniors. His proposal could cost as much as $1.8 trillion and ultimately endanger the Social Security trust fund itself, according to nonpartisan budget watchers.
Largely absent from the discussion, for now, are the tax cuts from Trump’s 2017 tax law that will expire at the end of 2025. Extending those cuts carries a $4.6 trillion price tag.
Just what the tax code needs—more complexity.
Inevitably, people will tell me that it’s always been this way. No it hasn’t. America has not always been a banana republic. The national debt as a share of GDP fell sharply in the second half of the 20th century. Bill Clinton ran three consecutive budget surpluses at the end of his administration. Fifty years ago, presidents were held accountable for their crimes—indeed bipartisan pressure forced Nixon to resign. You did not have the Supreme Court ruling that presidents were above the law.
Sorry, it has not always been this way.
I guess if we’re going broke anyway, why not throw a wild party with borrowed money before the creditors show up at the door. Or pray that AI will save us all.
PS. As always, there will be unintended consequences:
But the plan is not without controversy. Economists say it could incentivize workers and employers to shift more compensation from wages to tips.
I recall when 10% was normal. Then 15%. If this passes I might just become one of those greedy old curmudgeons and stop at 20%, no matter how high they try to push the standard tip. And will my dentist start demanding tips, with the threat of pain if I don’t pay up?
As for Social Security, lower wage seniors are already exempt from paying income tax on their benefits. So that tax cut will favor the more affluent—like me!
PPS. Oh, and I forget to mention Trump’s plan to use billions of taxpayer dollars to invest in cryptocurrency. What could go wrong?
PPPS. Predict how many days before one of our politicians advocates abolishing the gasoline tax.
I’ve come around to the HL Mencken view of the world. Treat politics like a big joke or it will drive you crazy.