Tax Cuts Just What the Doctor Ordered for American Economy and President Trump

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The GOP tax cut is about two weeks old, and already we are seeing signs that it’s working. Americans for Tax Reform has found 117 companies that have given more than a million employees bonuses because their corporate tax rates have gone from 35 percent to 21 percent. That amounts to the opposite of a double whammy:  more money to take home and less money to give back to the government.

To be sure, it’s not just the tax cuts that explains what’s happening:  companies are also giving the bonuses because, for many of them, profits are up and the climate looks good for business.

There may also be a keeping-up-with-the-Joneses aspect to the bonuses, as companies try to make sure they hang onto the employees they value before some other company makes them a better offer.

All of these are good signs for the economy in 2018.

Some commentators have made much of polls showing that the proposed tax cut was unpopular with voters in the fall, with some sounding as if unfavorable poll numbers alone mean the tax cut is bad policy. This is a mistake, for two reasons. First, some of the unpopularity of the tax cut stems from President Donald Trump’s own unpopularity. Since his inauguration his favorable rating has never gone above 45 percent, and since May 2017 it has hovered in the mid-to-high 30s. If Trump is for something, a sizable segment of the public is liable to be against it – at least at first.

That leads to the second point, which is more important:  If the tax cuts work in 2018, it won’t matter what their popularity was in 2017. And there’s every reason to think they will work. Major tax cuts have always been a spur to the economy. Under Presidents Calvin Coolidge in the 1920s, Jack Kennedy in the 1960s, and Ronald Reagan in the 1980s, tax cuts jolted the economy into growth and prosperity.

The new tax cut decreases personal income tax marginal rates, and those will help somewhat, because many people will have more to save and spend, which should help the economy. And they’re a good thing in their own right, because Americans will get to keep more of their money.

But the corporate tax rate drop is the jewel in the crown. It moves the United States from one of the highest corporate tax rates to one slightly lower than the world average. While we’d like to see it lower still, the advantages of doing business in the United States (stability, large population, diversified economy, powerful financial institutions, access to education and training) together with a new, more reasonable corporate tax rate ought to make this country more competitive with smaller countries with lower rates.

Critics worried about whether fat cats will make more money because of the tax cuts are missing the point:  Everyone is likely to do better. As Jack Kennedy famously said, a rising tide lifts all boats, and the American economy, which has seen hopeful signs in 2017, looks ready to take off in 2018.

That’s the case irrespective of what the stock market does, incidentally. The Dow is now at an all-time high of 25,000-plus, and some analysts think it’s due for a correction. Even if that happens, there’s no reason to think the fundamentals of the economy won’t continue to lead to strong growth.

Yet even economic growth isn’t the be-all and end-all of our economy.  That honor belongs to freedom. When we Americans keep more of our money, we have more freedom.

The tax cut and Neil Gorsuch on the U.S. Supreme Court are the two major tangible achievements of the first year of the Trump administration, which has seen turbulence and several high-profile failures. But they are big wins.