{"id":9805,"date":"2019-12-18T10:00:11","date_gmt":"2019-12-18T16:00:11","guid":{"rendered":"http:\/\/blog.uwsp.edu\/cps\/?p=9805"},"modified":"2019-12-20T10:23:16","modified_gmt":"2019-12-20T16:23:16","slug":"the-economy-5-things-you-should-know-for-2020-and-beyond-part-3","status":"publish","type":"post","link":"https:\/\/blog.uwsp.edu\/cps\/2019\/12\/18\/the-economy-5-things-you-should-know-for-2020-and-beyond-part-3\/","title":{"rendered":"The Economy: 5 Things You Should Know for 2020 (and Beyond) \u2013 Part 3"},"content":{"rendered":"\n

Number 3: The Timing of Those Tax Cuts<\/strong><\/p>\n\n\n\n

Part\nof what made the recent tax cuts unique is that they occurred in a growing<\/em>\neconomy with near historic lows in unemployment. Prior to 2018, recent tax cuts\noccurred when the economy was struggling and unemployment was relatively high. <\/p>\n\n\n\n

In\nthe current economic recovery, the payroll tax for Social Security was\ntemporarily reduced under President Obama. In 2011 and 2012, the payroll tax was reduced from 6.2% to\n4.2%.  Payroll taxes are paid up to a\nsalary limit; the salary limit was\n$110,100 in 2012 and $106,800 in 2011.  In\nessence, the payroll tax cut provided a 2% tax reduction on income below the\nsalary limit. The objective was to help a struggling economy recover\nfrom the financial crisis, and quickly give working individuals a reduction in\ntaxes. As indicated previously, in 2010 the unemployment rate was nearly 10%;\nthe economy had contracted in 2009 with two consecutive quarters of negative\nGDP growth. At the time of the tax cut, the economy was struggling, with\nrelatively high unemployment. <\/p>\n\n\n\n

In 2003 The Jobs and Growth Tax Relief\nReconciliation Act was passed under President Bush in an effort to kick-start\nthe economy after a series of troubling events. Several factors adversely\nimpacted the economy after the turn of the century, including an economic\nslowdown beginning in early 2001, the terrorist attacks of 2001, and the\nbursting of the dot.com (overpriced internet\/technology stocks) bubble. Tax\nrates were generally reduced across all income brackets; tax rates on capital\ngains and dividends were also reduced. After ending 2000 at 3.9%. the\nunemployment rate had gradually increased to over 6.0% in 2003.  After growing at 4.8% in 1999 and 4.1% in 2000\nrespectively, GDP grew an only an annualized 1.0% rate in 2001 with negative growth\nin the first and third quarters. At\nthe time of the tax cut, the economy was struggling, with relatively high\nunemployment. <\/p>\n\n\n\n

The\ntax cuts implemented in 2018 were different. The economy had over eight years\nof economic growth; the unemployment rate had declined gradually from\napproximately 10% in 2009 to nearly 4% at the end of 2017. Contrary to recent tax\ncuts, the 2018 tax cuts were implemented when the economy was expanding and the\nunemployment rate was relatively low. \nThe tax cuts contributed to a cost yet to be paid \u2013 a growing federal\nbudget deficit and record levels of federal debt. But at some point, they will\nbe paid.<\/p>\n\n\n\n

A\nside effect of the 2018 tax bill was how the resulting split between individual\nand corporate taxes comprised total federal tax revenues. In fiscal year 2018,\ncorporate income taxes comprised 6.1% of federal tax revenue. The 6.1% rate was\nnot only the lowest<\/em> of the decade, it was the lowest rate ever based on\nOffice of Management and Budget data available since 1934. Conversely in fiscal\nyear 2018, the contribution of individual income taxes to total federal tax\nrevenue increased. Federal income tax revenue from individual income taxes\ncomprised 50.6% of federal tax revenue in fiscal year 2018. The 50.6% rate for\nindividual income taxes was not only the highest<\/em> of the decade, it was\nthe highest rate ever based on Office of Management and Budget data available\nsince 1934.<\/p>\n\n\n\n

For further\ninformation:<\/p>\n\n\n\n