Instead of the usual eat-your-vegetables pitch of public health reformers, he is offering Philadelphians something more delicious: a giant pot of money to fund popular city projects. He says his soda tax could raise more than $400 million over five years, enough to fund not just universal preschool, but also renovations of local libraries, parks and recreation centers; “community schools” that wrap up social services with education; and cash for the troubled municipal pension program. He isn’t using the word obesity, or suggesting that people should drink less soda.
.. His tax would raise the price of a 20-ounce bottle of soda by 60 cents, an increase likely to make some shoppers think twice about a purchase
.. In Philadelphia, industry officials are also making more local anti-tax arguments, saying that a tax devised to lower consumption of the taxed good will not be a stable source of revenue for an initiative, like universal prekindergarten, that requires permanent funding.
An Analysis of Ted Cruz’s Tax Plan
The Tax Policy Center estimates that the proposal would reduce federal revenue by $8.6 trillion over its first decade and an additional $12.2 trillion over the subsequent 10 years, before accounting for added interest costs or considering macroeconomic feedback effects.1 Most of the revenue loss would stem from repealing payroll taxes ($12.2 trillion), cutting individual income taxes ($11.9 trillion), and eliminating the corporate income tax ($3.5 trillion). The VAT would raise $19.2 trillion over the decade, offsetting only 70 percent of the cost of the tax cuts
.. In 2017, the proposal would cut taxes at every income level, but high-income taxpayers would receive the biggest cuts, both in dollar terms and as a percentage of income. Overall, the plan would cut taxes by an average of about $6,100, or about 8.5 percent of after-tax income.
.. However, the highest-income 0.1 percent of taxpayers (those with incomes over $3.7 million in 2015 dollars) would experience an average tax cut of more than $2 million in 2017, nearly 29 percent of after-tax income. Households in the middle of the income distribution would receive an average tax cut of $1,800, or 3.2 percent of after-tax income, while taxpayers in the lowest quintile would receive an average tax cut of $46, or 0.4 percent of after-tax income.
Tax Cuts Can’t Motivate the Republican Base Anymore
It wasn’t just the level of taxes, which was high; it was also how that level interacted with inflation.
.. In an era of double-digit inflation, this was a big problem, and it focused people intently on how much they hated their taxes. It also gave people the feeling that the government was going to go on taking more and more, while delivering less and less in the way of either public order or economic growth. That made people well down the income distribution very receptive to promises of tax cuts.
.. it’s going to be very hard to get those bottom three or four quintiles interested in your tax reform, because their income taxes are already negligible. And since that group has 80 percent of the people in the country, that means it’s going to be very hard to get elected on a platform of tax cuts.
.. Moreover, Republicans now have the same problem that Democrats and Republican New-Deal-Lite types had in 1979: they’ve delivered on the tax cuts, and the tax cuts did not deliver on the fabulous promises of economic growth.
Two-Percent Growth Is a Loser for the Angry Middle Class
Real middle-class wages are still flat-lining. These folks get nothing out of 2 percent growth.
.. Research has shown that middle-income wage earners would benefit most from a large reduction in corporate tax rates. The corporate tax is not a rich-man’s tax. Corporations don’t even pay it. They just pass the tax on in terms of lower wages and benefits, higher consumer prices, and less stockholder value.
.. Slash the corporate tax rate to 15 percent for large C-corps and small S-corps, go to immediate tax deductions for new investment, and make it easy for firms to repatriate their overseas earnings.
.. This would be the single-most stimulative program for reigniting economic growth. Principally, it’s a middle-class tax cut. If you combine that with regulatory rollbacks and a stable dollar, within less than a year the U.S. economy can break out of its doldrums.