The Incredible Shrinking GOP Tax Cut

Many Republicans have forgotten the principles of pro-growth tax policy

WSJ editorial. Excerpts:

"The most successful tax cuts of the last 100 years—the Mellon, Kennedy and Reagan cuts—all focused on cutting rates at the margin. The least successful—the Bush cut of 2001—handed out rebates that boosted consumption for a short period but did little for growth.

Mr. Trump has floated raising the top marginal rate to 39.6% from 37% for filers making more than $2.5 million. The Tax Foundation says this would affect about 175,000 filers, the most likely to invest and take risks in new ventures. Small businesses that pay at the individual rate would pay more than corporations."

"in 2022 the top 1% paid 40.4% of income-tax revenue on 22.4% of reported earnings. The point of low marginal rates isn’t to help the already rich, but to offer incentives to those who want to become rich."

"Growth, not income redistribution. Democrats these days view the tax code as they do spending—a goodie bag to parcel out favors to special interests. Credits for EVs, or carbon capture, or housing. These credits are a form of income distribution through the tax code. They promote investment based on political preferences rather than market returns. This inevitably leads to misallocated capital and slower economic growth."

"Kennedy’s Treasury spurred his tax-rate cuts that led to the 1960s boom, while Bill Bradley and Dan Rostenkowski played vital roles in Reagan’s 1986 tax reform that cut the top income tax rate to 28%."

"The $2,000 per child credit is hugely expensive—$690 billion over 10 years—and does little to spur growth, as numerous studies have shown."