Can someone explain the $2 trillion Trump double-count math error to me?

[fuzzybabybunny]

Not trying to be political, just trying to understand the issue that everyone says seems to be a basic math error. I don't believe that trickle-down works in the vast majority of cases but let's just assume it does, since that's the assumption from the budget proposal.

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Let's just say that the people collectively earn $10,000 and the government taxes at 20%, so the government collects $2,000.

The government then cuts taxes to 15%.

The people collectively earn $10,000 and the government taxes at 15%, so the government collects $1,500.

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But the belief is that by cutting taxes to 15%, the economy will be spurred to grow.and the people will have more money, thus...

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The idea is that people *no longer* collectively earn $10,000. They earn $15,000 because the economy grew as a result of trickle-down tax cuts..

15% of $15,000 is $2,250, which is $250 higher than the original $2,000 that the government collects. The idea is that the government will collect more tax revenue while having a lower tax rate because the lower tax rate spurs economic growth which means people are richer and thus pay more in taxes, despite having a lower rate.

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So the government is predicting that their tax cut from 20% to 15% will bring in an increase of $250 in government revenue. It then expects to use that extra $250 to pay for stuff.

Where is the double count?

 

[sandorski]

Basically the problem is that the stated problem is that The Tax Cut of $2 Trillion(IIRC) will be recovered from GDP Growth. However, that same $2 trillion due to GDP Growth is also being claimed to reduce the Deficit/Debt of the Government. The conflict here is that the Tax Cut decreases Income, thus increasing Deficit/Debt, so if the GDP Growth recovers the Tax Cut Income loss, it only recovers the lost Income of the Tax Cut.

 

[dullard]

Sandorski got it correct. Using Fuzzy's numbers, the Trump budget says that not only did cutting taxes not lose the government revenue from $2000 to $1500 ($500 recovered). But it also drops the deficit by $500.

If the government was spending $2250 before and collecting $2000 before, then the deficit is $250. After, if everything Trump predicts is true, then cutting taxes will get $2250 government revenue. Combined with $2250 spending, the deficit is $0. But Trump claimed the deficit will drop by the same amount as the recovered revenue ($500). The deficit didn't drop by $500 though. That is the double counting.

That said, in no time in history did a tax cut grow the economy by the 50% needed for this example. Heck, there is very little evidence that any tax cut has grown any economy.

 

[fuzzybabybunny]

Basically the problem is that the stated problem is that The Tax Cut of $2 Trillion(IIRC) will be recovered from GDP Growth. However, that same $2 trillion due to GDP Growth is also being claimed to reduce the Deficit/Debt of the Government. The conflict here is that the Tax Cut decreases Income, thus increasing Deficit/Debt, so if the GDP Growth recovers the Tax Cut Income loss, it only recovers the lost Income of the Tax Cut.

Ok, so put into numbers, say that the government takes in $10 trillion but spends $11 trillion. The deficit is thus $1 trillion.

They want a tax cut of $2 trillion, which means they'll now have $8 trillion in revenue, BUT that $2 trillion will be made back in economic growth, so now they're back to their original $10 trillion.

If they continue to spend $11 trillion, the deficit is still $1 trillion because they're still taking in $10 trillion.

So.... what they're claiming is that the deficit will now somehow, uh, be a surplus of $1 trillion instead?

+$2 trillion extra revenue (which has already been counted) + -$1 trillion deficit = +$1 trillion surplus?

 

[ctbaars]

Fuzzy math has been used forever. By every administration. I even use it on my kids.

 

[dullard]

So.... what they're claiming is that the deficit will now somehow, uh, be a surplus of $1 trillion instead?

Yes, that is what they are claiming.

 

[fuzzybabybunny]

Yes, that is what they are claiming.

F*CK ME.

 

[sandorski]

F*CK ME.

Indeed.

 

[soulcougher73]

It's fuzzy math that is banking on something that rarely happens to re-enforce their numbers is how i take it. I could be wrong. Im not great with all this tax stuff lol

 

[BxgJ]

It's fuzzy math that is banking on something that rarely happens to re-enforce their numbers is how i take it. I could be wrong. Im not great with all this tax stuff lol

I think they're not only 'banking' on it, they're doing that and then double counting it.

 

[rcpratt]

Yeah, this is worse than just fuzzy math. They're double-counting the fuzzy math.