Friendly Memo to President Trump: Why Not Reward Success, Not Punish It?

So I guess it wouldn’t be any fun if a big beautiful tax bill going through the legislative meat grinder wasn’t rife with rumors about tax hikes. And President Trump is kind of playing both sides of the issue by saying that he would be in favor of, let me quote: “A tiny tax increase for the rich, which I and all others would graciously accept in order to help the lower and middle income workers.”Yet Mr. Trump notes that the “problem” would be “that the radical left Democratic lunatics would go around screaming, ‘Read my lips,’ the fabled quote by George Bush the elder that is said to have cost him the election.” Mr. Trump concludes: “No, Ross Perot cost him the election. In any event, Republicans should probably not do it, but I’m okay if they do.”Well, alright, kind of playing both sides of the story there, isn’t he? Yet our sources now tell us that Speaker Johnson and the House majority leader, Steve Scalise, have buried the idea of a millionaire’s tax or a special high-end tax bracket, and that is good news indeed. Frankly, I think a millionaire’s tax bracket would just unnecessarily divide the Senate and House Republicans, most of whom have signed on to Grover Norquist’s taxpayer protection pledge. And that would risk an entire blowup with the reconciliation bill, and that would risk a $4 trillion or $5 trillion tax hike, which would let the Democrats completely off the hook. But the economics of an increased tax on the wealthy are just as bad as the politics. Small businesses, the so-called passthrough businesses, think LLCs or Subchapter S companies, they don’t pay the corporate tax.Their earnings are reported on the owner’s tax returns, and hence the small business owners pay the individual income tax. Now, according to the Tax Foundation, more than 90 percent of American businesses are organized as passthrough companies, and they would bear the brunt as some kind of new millionaire tax bracket. Meanwhile, these passthrough companies employ almost half of the entire American workforce, so higher taxes on those entities would mean less hiring and lower wages. Now, Art Laffer has often said the top tax rate is perhaps the most important tax of all. And that’s not only because of the incentive effect, of course, if you tax something less you get more of it, but if you tax something more, you get less of it, but also, those are the successful entrepreneurs and economic activists who create the jobs and the incomes for the middle and lower middle income folks. So why punish success? We should be rewarding success and rewarding entrepreneurship from startup LLC companiesthat, you know, within a year or two or three could balloon into huge successes, but they’d be facedwith punitive taxation. That’s an example of socialist economics, not supply side capitalist economics. So hopefully, the entire big beautiful bill will remain a tax cutting bill and a deregulation bill that will grow the economy by leaps and bounds and give us the blue-collar boom that everybody’s hoping for.From Mr. Kudlow’s broadcast on Fox Business Network.

Friendly Memo to President Trump: Why Not Reward Success, Not Punish It?

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