There’s a mindset prevalent with many in our country. As goes the financial strength of the government, so goes the nation. The focus is not so much on the vibrancy of the private sector as much as it is in the robustness of government. That’s why politicians like our own Gov. John Bel Edwards often speak of stability and consistency in their approach to government budgets. You don’t often hear them call for stability and consistency for business owners.
Politicians of the ilk of Edwards tend to believe government, not the free market, is the creator of most things good. That’s because their well-meaning emphasis is often on equality, not opportunity, prosperity or wealth creation. They prioritize wealth redistribution, not wealth creation.
The contrast of philosophies could not be more stark when you compare Edwards to President Donald Trump. Edwards first instinct in office was to raise taxes and raise them he did, to the tune of $1 billion dollars. That’s one billion that used to be in the free market creating opportunity and jobs, moved into the government sector where it is far less valuable. The private sector reveres the bottom line while the government tends to ignore it. In government, it’s often who you know or what union you belong to that determines your value, not how good you are at what you do. It’s one of the reasons it’s difficult to fire a government employee.
President Trump’s recent tax cut legislation will transfer $1.5 trillion dollars out of the government sector into the private sector. In other words that $1.5 trillion is about to become much more productive.
House Majority Whip Steve Scalise, R-Metairie, played a huge role in getting the Trump tax overhaul legislation passed. In a recent editorial, Scalise and Louisiana Sen. Bill Cassidy described the legislation as good for Louisiana.
“The law includes an important provision that will provide significant new funding for coastal restoration and hurricane protection in Louisiana. Our provision provides an additional $300 million for revenue sharing for Gulf States, and Louisiana should expect to receive at least $100 million of that funding to restore our coast and protect against future storms. This is a landmark victory for coastal restoration and puts down an important marker for future increases in Louisiana’s revenue sharing.”
In a recent press release, Rep. Garret Graves, R-Baton Rouge, who also voted for legislation, called the Tax Cuts and Jobs Act “a game-changing rewrite of our tax system that finally puts what’s best for people, not government, first.”
The law doubles the standard deduction for single filers from $6,500 to $12,000 and for married filers it goes from $13,000 to $24,000. Graves says a single mother with one child earning $41,000 will see a staggering 73 percent tax cut. Her tax bill will fall from what she would pay in 2017, $1,792, to only $488 in 2018. Graves also says a family of four with an income of $73,000, will see a 58 percent tax cut. Their tax bill will go from $3,557 in 2017 to only $1,499 in 2018.
Where the tax legislation will have the most impact is with job creation. Our nation has the highest corporate taxes in the industrialized world with a job killing and a free market squashing rate of 35 percent. Beginning January 1st, the rate drops to 21 percent. This alone will make us much more competitive globally.
Where the tax legislation is lacking is it did not come with corresponding cuts and will, in the short term, grow the deficit. But as our economic engine heats up, it will generate more revenue for the treasury and some economists believe that will reduce our debt.
The good news is Louisiana will benefit as the feds will let most of us keep more of our money. But we still have the highest state sales tax in the nation and an income tax as high as 6 percent. The Trump tax cuts will make America more competitive with other countries. But will Louisiana be able to compete with other states? Growing the free market instead of state government would make for a good start.