Today, we discuss an article that appeared in the November 12, 2024 Washington Post, describing good news that’s bad news and bad news that’s good news. Here are a few excerpts:

These tax cuts will go away without action by Congress and Trump Many of the tax cuts enacted during Trump’s first term are set to expire at the end of 2025, but keeping them could add trillions to the federal debt. By Julie Zauzmer Weil, November 12, 2024 at 11:30 a.m. EST Many tax cuts enacted during President-elect Donald Trump’s first term are set to expire at the end of 2025. That means taxes will rise for most Americans unless Congress acts to renew them.

That is really bad news.

Our Monetarily Sovereign federal government neither uses nor needs tax dollars; they are destroyed upon receipt by the Treasury. They are paid from the private sector’s M2 money supply measure, and when they reach the Treasury, they cease to be part of any money supply measure. Effectively, they are destroyed by being added to an infinite and immeasurable money supply.

Trump has promised to extend almost all of the cuts, but that would come at a hefty price. By some projections, renewing the cuts would add $4 trillion or more to the federal debt over the next decade.

Translation: Renewing the cuts would keep 4 trillion or more growth dollars in the economy. Great news. (The “federal debt” isn’t federal, and it isn’t debt. The dollars are deposits wholly owned by the depositors, not the federal government. The government never takes ownership of the dollars; it merely holds them for safekeeping. The closest corollary is safe deposit boxes.)

The 2017 law lowered tax rates, dropping the marginal tax rate for the highest earners to 37 percent from 39.6 percent, for example. Unless Congress acts, the rates will snap back in 2026.  Extending current law would reduce revenue by $1.8 trillion.

Translation: Not extending the current law would cause the highest earners to pay $1.8 trillion more. This would be a $1.8 trillion loss for the economy (bad news), but all other things being equal, a narrowing of the income/wealth/power Gap between the rich and the rest would be good news.

The 2017 law almost doubled the standard deduction, one of several steps that greatly reduced the number of people who itemize deductions (currently 1 in 10 taxpayers). If the standard deduction reverted to pre-2017 levels, less money would automatically be shielded from taxes and more households would itemize. Extending current law would reduce revenue by $1 trillion.

Translation: Extending the current law would leave $1 trillion more growth dollars in the economy (good news). But with fewer deductions, the effect on charities, homeowners, and other borrowers is complex and negative. On balance, the increased standard deduction may increase tax bills (bad news), especially for homeowners. This depends on whether tax rates go up to cover the increased deductions.

The 2017 law eliminated the personal exemption for each member of a household, which was $4,050 at the time. Without congressional action, that would return in 2026, which would allow people to shield more income from taxes. Extending current law would raise revenue by $1.6 trillion.

Translation: Extending the current law would remove $1.6 billion in growth dollars from the economy (bad news).

The maximum child tax credit doubled from $1,000 per child to $2,000. Extending current law to keep the $2,000 credit would reduce revenue by $592 billion.

Translation: Keeping the $2,000 child tax credit not only would keep $592 billion growth dollars in the economy (good news), but those dollars would go to average families. Otherwise, the Gap between rich and the rest would widen (very bad news).

Under the 2017 law, everyone but members of the military lost the ability to claim a deduction for moving expenses. The law also took away the option for employers to reimburse workers tax-free for moving expenses or for up to $20 a month in bike commuting expenses. Those benefits are set to return in 2026. Extending current law would raise revenue by $15.5 billion for moving expenses and $136 million for bike commuting.

Translation: Extending the current law would take $15.636 billion growth dollars out of the economy, mostly from average families (very bad news).

The 2017 law capped at $10,000 the amount of state and local taxes — often abbreviated as SALT — each household can deduct from federal income taxes. The cap is unpopular in blue states with high taxes, but removing it would benefit primarily the wealthiest households. On the campaign trail, Trump said he favors letting this provision lapse so people everywhere can deduct all their state and local taxes again. The Congressional Budget Office did not specifically estimate the cost of extending the SALT cap in and of itself, but the Penn Wharton Budget Model estimated in September that lifting the SALT cap would cost the federal government as much as $1.1 trillion over the next decade.

Translation: Cancelling SALT would add $1.1 trillion in growth dollars to the economy (good news).

The law made changes to several other itemized deductions, including allowing people to deduct more charitable expenses, restricting the mortgage interest deduction for newly purchased homes to the first $750,000 of the mortgage instead of $1 million, blocking victims of theft from claiming their losses, and removing tax preparation fees and unreimbursed employee expenses as eligible deductions. All of those changes are set to expire. Extending current law would raise revenue by $908 billion.

Translation: Extending the current law would take $908 billion in growth dollars from the economy (bad news).

The 2017 law raised the threshold at which estates are subject to federal taxation when someone dies, increasing it from just over $5 million to just over $11 million. Since then, inflation adjustments have raised the threshold to more than $13 million. The threshold is set to snap back, with adjustments for inflation, to an estimated $7 million in 2026.

Extending current law would reduce revenue by $126 billion.

Translation: Allowing the threshold to snap back would take $126 billion in growth dollars out of the economy, mostly from upper-middle-class families, not from the rich, thereby widening the Gap between the rich and the rest (very bad news).

The 2017 law reduces the number of households subject to the Alternative Minimum Tax, a parallel tax system designed to ensure that wealthier households pay a minimum amount of income tax. The tax — often abbreviated as the AMT — has been criticized as overly complicated and hard to calculate. Many more households would be subject to this tax again if the provision expires. Extending current law would reduce revenue by $1 trillion.

Translation: Extending the current law would leave $1 trillion growth dollars in the economy, almost all of it in the hands of middle—and upper-middle-income families. The rich have found ways to avoid this law. (Extending the law would be good news)

The 2017 law created a generous deduction for business owners whose business income “passes through” to their personal income tax return (instead of being taxed as corporate income). The provision allows gig workers such as Uber drivers and dog walkers, partners in massive business interests, and others to deduct up to 20 percent of their business income. Some Republicans have concerns about the complex ways this deduction was structured and want to revise it in a 2025 tax bill. Others want to simply renew it to prevent it from expiring. Extending current law would reduce revenue by $548 billion.

Translation: If the calculation is correct, this would leave $548 growth dollars in the economy (on balance, good news). SUMMARY For reasons I cannot understand, the author, Julie Zauzmer Weil, and her peers seem to think that growth dollars coming out of the economy and going to the Monetarily Sovereign government that neither needs nor uses them is good news. By simple formula, economic growth requires money growth, while the federal government creates all the dollars it needs by passing laws. If someone can explain why a federal deficit is bad but an economic deficit is good, I would be delighted to publish your response. I have been trying to unravel this mystery for over a quarter century, and today, I am no closer to an answer than ever. Rodger Malcolm Mitchell Monetary Sovereignty Twitter: @rodgermitchell Search #monetarysovereignty Facebook: Rodger Malcolm Mitchell; MUCK RACK: https://muckrack.com/rodger-malcolm-mitchell; https://www.academia.edu/

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The Sole Purpose of Government Is to Improve and Protect the Lives of the People.

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