With cable and online news outfits reporting on events 24/7/365, it should be easy for the viewing American public to find the really meaningful stories at any hour of the day or night. But the sheer volume of “news,” often offered without any filter or verification, is making it more difficult to separate the journalistic wheat from the chaff.
A quarter of a century ago, during the presidential campaign of 1992, we first heard a phrase that resonates today just as loudly as it did in the days before social media: “It’s the economy, stupid!” Created for the presidential campaign of Governor Bill Clinton by campaign manager James Carville, the phrase served as a constant reminder for campaign officials to stay on message. The Clinton camp wanted to keep the focus on the anemic economy America was enduring under the presidency of incumbent President George H.W. Bush. The strategy worked. The campaign stayed on message with a drumbeat of bad economic news and Bill Clinton was elected America’s 42nd President.
The Clinton presidency coincided with a decade-long economic expansion that currently stands as the longest boom in U.S. history. During Clinton’s eight-years in the White House, America added over 20 million jobs.
Today, as Republicans attempt to pass a tax reform bill the GOP and President Trump believe will reignite America’s economic flame, people need to sift through other news and noise that drowns out the primary message: “It’s the economy…” Wall Street continues its upward drive—gaining over 30 percent in value since Trump took office. And, even as the nation has demonstrated its resilience in the wake of two devastating hurricanes that hit major economic centers of the American South, anti-business regulations and tax policies in many states and local municipalities sit like speed bumps slowing economic growth.
Elsewhere in this magazine, you can read about a litany of legislative proposals that seek to elevate the lowest on the economic ladder by holding back – and in some cases, punishing – those at a higher level of success. Whether it’s a “millionaire’s tax,” more mandates for additional employee benefits, or a “robot tax” on companies that seek the efficiencies of automation, high taxes and onerous regulations pose a significant threat to innovation and initiative, choking the entrepreneurial spirit that feeds a solid and growing economy.
For an example, let’s look at the differing results from two recent soda tax experiments, one in Chicago and another in Philadelphia. The initial result was the same in both municipalities, as consumers who could easily travel, went outside the tax boundaries to purchase their sugary drinks, while those who couldn’t, paid the price. Consequently, small business (and in this instance larger businesses such as Pepsi Co.) felt the brunt and did what they had to do to stay solvent. They laid off workers and raised prices. In Chicago, disenchantment with the tax quickly gave birth to a formal repeal effort which succeeded on an almost unanimous county-wide vote. On the other side of the coin, Philadelphia held firm with the tax and as a result, nearly half of the business in that city reported a greater than 10 percent drop in sales.
In a similar vein, let’s think about the so-called “Millionaire’s Tax,” some version of which is in place in six states and under consideration in a host of others. Couched in terms of “getting the wealthy to pay their fair share,” the additional taxes are generally applied not just to earners of $1 million or more, but to whomever government powers deem to be wealthy. In New York, wealthy equals $1,077,500 and if an earner makes that much, he or she pays an additional 2 percentage points in taxes. The District of Columbia applies a local income surcharge on income of $1 million or more. But wealthy is in the eye of the beholder as far as tax burdens go – New Jersey applies its millionaire’s tax on incomes over $500,000 (2.6 percent surcharge), while Maine applies an additional 3 percent surcharge on incomes over $200,000.
With tax reform likely in the coming months, we can only hope for more more common sense in our tax system, where those who contribute to economic growth – like Dunkin’ Donuts franchise owners who invest in real estate, equipment and people – won’t be penalized under a system that doesn’t seem to recognize the importance of making the economy work for everyone. If not, that 1992 campaign phrase may wind up morphing into something new: “It’s the stupid economy.”
DDIFO Executive Director