President Donald Trump has long been known for his fondness for superlatives when describing his projects and policies. His administration’s proposal for a tax cut is certainly no exception. In a recent interview with the Associated Press he declared: “It will be bigger, I believe, than any tax cut ever. Maybe the biggest tax cut we’ve ever had!”
Americans just got their first taste of some of the details of his tax overhaul. Treasury Secretary Steve Mnuchin repeated his boss’ boast about the tax cut’s size and said it would slash the top corporate rate to 15 percent from 35 percent. It would also simplify individual income rates and reduce them a little, while doubling the standard deduction and eliminating certain itemized deductions.
In assessing whether his cuts might be the biggest ever, many pundits have pointed to President Ronald Reagan’s tax overhaul in 1981, which reduced government revenue by 2.9 percent of GDP.
But was that really the biggest U.S. tax cut ever? Hardly. In fact, we have to go back almost 150 years – immediately after the Civil War and the beginning of the income tax – to find the American whopper of tax cuts. Put simply, it would be very hard for Trump to exceed that cut. Continue reading
It is almost April 15th; the time many people in the U.S. file their income taxes. Shocking as it may seem, personal income taxes don’t provide most of the federal government’s revenue. Since World War II personal income taxes have consistently provided less than half of all the money taken in by Washington.
Just as shocking has been the change in the source of federal revenues over time. The official statistics show in the 1940s and 1950s corporations picked up a major share of supporting the federal government. Today, it is taxes on workers. Social security and Medicare taxes are now four times more important in providing revenue for the government than they were in the mid-1940s. Continue reading
Are people in the U.S. getting enough to eat? Unfortunately, even though the U.S. is bountiful and the world’s biggest individual exporter of food, millions of Americans actually are not. Continue reading
What will jobs be like in the future? FastCompany asked me to write a short article that answered this question. My answer was simple: what is likely in store for a growing number of people are exceptionally long work days combined with exceptionally high pay. Many more people in the future will be bringing home fat paychecks, but rarely be home long enough to spend them. Continue reading
Recently, The New York Times ran a front page story highlighting demonstrations that are being held for an increase in the minimum wage to $15 per hour. Currently, the Federal minimum wage is $7.25 per hour, which means more than doubling the pay of low-wage workers. Is there any precedent for a $7.75 absolute increase, which is a 107% relative increase? Continue reading
In the previous blog post, I looked at how many people have emergency savings. Many financial advisers suggest having three months of expenses saved up. Why is three months “the rule?” Why not six months or one month? Continue reading
Financial advisers and the media (e.g. Time and NY Times) suggest the typical person should have 3 months of income saved in case of emergency. Emergency funds are important because people without these savings have no fall back when an unexpected bill, reduction in income or incredible opportunity arises. While having emergency savings is a good idea, relatively few people have this backup. Why don’t more people reduce their financial risk and put money aside? Continue reading