Dear editor:
The recent tax reduction law passed this year brought out the "Tax cuts for the rich" crowd, as well as the usual mental midgets who hate corporations. One of those who recently displayed continuing ignorance is columnist John Brummett, who has a column in the Arkansas Democrat-Gazette.
His Thursday article stated the tax cuts enacted by Congress would increase the national debt. He is obviously quoting the Congressional Budget Office. The CBO is anything but competent in this and other estimates. Using a static estimate of changes in the economy with nothing changing except tax rates is simply wrong. No one in their right mind would assume zero changes would occur in the economy from year to year. (John Brummett is obviously an exception.)
The proper way to forecast is to use a static estimate as a base, coupled with the changes up and down for taxable income. If the new tax rates are held fixed and taxable income is then varied upward in small increments, then a reasonable basis can be made to estimate the amount potential debt would increase/decrease and quantify the amount.
I have examined gross federal revenue for the year 2016 ($3.4 trillion). A half percent increase in individual taxable income (roughly half of gross federal revenue) would generate $160 billion in additional federal revenue. With an increase in individual income, payroll taxes (30 percent of federal revenue) would also increase and I suspect at a higher rate yielding potentially another $90 billion. Corporate income will undoubtedly rise, as will other sources of income, but even assuming they remain flat, a 1.5 percent increase in taxable income would yield near half the CBO's 10-year debt $1.7 trillion increase estimate in the first year. Hardly the disaster some would have you believe.
Unfortunately, I must agree with Mr. Brummett that the new federal budget could potentially negate any additional income tax revenue and may even increase federal debt. Congress, even Republicans, seem to be oblivious to the fact our debt problems are a function of spending, entitlements requiring 60 percent of federal revenue are in dire need of reform.
Dennis Bosch
Hot Springs
Editorial on 02/20/2018