$2 trillion Trump double-count math error
05-25-2017, 03:53 PM
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$2 trillion Trump double-count math error
Not trying to be political, just trying to understand the issue that everyone says seems to be a basic math error. I don't believe that trickle-down works in the vast majority of cases but let's just assume it does, since that's the assumption from the budget proposal.
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Let's just say that the people collectively earn $10,000 and the government taxes at 20%, so the government collects $2,000.
The government then cuts taxes to 15%.
The people collectively earn $10,000 and the government taxes at 15%, so the government collects $1,500.
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But the belief is that by cutting taxes to 15%, the economy will be spurred to grow.and the people will have more money, thus...
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The idea is that people *no longer* collectively earn $10,000. They earn $15,000 because the economy grew as a result of trickle-down tax cuts..
15% of $15,000 is $2,250, which is $250 higher than the original $2,000 that the government collects. The idea is that the government will collect more tax revenue while having a lower tax rate because the lower tax rate spurs economic growth which means people are richer and thus pay more in taxes, despite having a lower rate.
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So the government is predicting that their tax cut from 20% to 15% will bring in an increase of $250 in government revenue. It then expects to use that extra $250 to pay for stuff.
Where is the double count?
****
Let's just say that the people collectively earn $10,000 and the government taxes at 20%, so the government collects $2,000.
The government then cuts taxes to 15%.
The people collectively earn $10,000 and the government taxes at 15%, so the government collects $1,500.
****
But the belief is that by cutting taxes to 15%, the economy will be spurred to grow.and the people will have more money, thus...
****
The idea is that people *no longer* collectively earn $10,000. They earn $15,000 because the economy grew as a result of trickle-down tax cuts..
15% of $15,000 is $2,250, which is $250 higher than the original $2,000 that the government collects. The idea is that the government will collect more tax revenue while having a lower tax rate because the lower tax rate spurs economic growth which means people are richer and thus pay more in taxes, despite having a lower rate.
****
So the government is predicting that their tax cut from 20% to 15% will bring in an increase of $250 in government revenue. It then expects to use that extra $250 to pay for stuff.
Where is the double count?
05-25-2017, 07:42 PM
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Assuming that the tax cuts creates a 3% growth rate
We have an extra two trillion dollars to "pay back" the amount lost to the smaller tax burden. Net change - zero .. assuming that will really generate that a much GDP
So two trillion lost due to a smaller tax percentage but two trillion gained because more taxes paid in due to growth = zero actual dollar change in federal income levels
Now.. take the same two trillion that got us back to zero - and use that to pay off other things.
We would need four trillion dollars gained from the growth hoped for with the lower taxes to do what they wanted to do in the original budget.
We have an extra two trillion dollars to "pay back" the amount lost to the smaller tax burden. Net change - zero .. assuming that will really generate that a much GDP
So two trillion lost due to a smaller tax percentage but two trillion gained because more taxes paid in due to growth = zero actual dollar change in federal income levels
Now.. take the same two trillion that got us back to zero - and use that to pay off other things.
We would need four trillion dollars gained from the growth hoped for with the lower taxes to do what they wanted to do in the original budget.
