RUSH: The earned income tax credit. I did some checking during the break. I can’t find anything on it. It’s not mentioned. USA Today says that it remains but is untouched. But other sources… The Washington Post says that top Republican officials haven’t decided to do with earned income tax credit. Do you know what that is, folks? The earned income tax credit is a way of assuming poor people earn money. You just assume they earn money and the amount is based on a formula, “the earned income.”
And then they get a credit on what their taxes would be if they earned it. They didn’t earn it. We assume that they did, and then give them a tax rate based on what they didn’t pay. Now, the typical Washington thinking behind this is that this is how we’re going to reward people who work, who try to get a job, as opposed to sit there and just cash welfare checks or food stamps or whatever. But this is all part and parcel of that statistic that 50% of income earners in America don’t pay any income tax.
The earned income tax credit ends up giving, essentially, tax refunds because an earned amount of income is assumed, is calculated. And then they calculate what tax rate and what taxes would have been paid on that assumed income, and then after assuming the person paid the tax, then they refund it. The only thing missing is that nobody paid anything. It’s all… It’s a scam. It is a way for… Alot of illegal immigrants capitalize on this, but a lot of poor Americans do too.
You can’t blame ’em. Hey, it’s these people in Washington setting up the rules. You know, we oftentimes sit here and blame the participants, but how can you blame them? If you tell a group of people, “You know what? All you gotta do is go out and get a job and we’re gonna assume you earn a certain amount of money and then we’re gonna assume you pay taxes on that money that you’re not earning, and then we’ll give you a tax refund on the taxes you didn’t pay.” Who wouldn’t go for that, if you’re in poverty or just barely above it?
But if that’s not gotten rid of it, if the earned income tax credit stays, then all the rest of this is… (sigh) Well, it’s just not what the Democrats and it’s not what the media are saying. Let’s go to the audio sound bites on this. The Associated Press: “The $5 Trillion Question for Trump Tax Plan: How to Pay for It.” They never ask that when Obama or Democrats are gonna do a tax cut (chuckles) ’cause they never do one. I just remembered! The question of how we’re gonna pay for Obama’s stimulus never came up.
How are we gonna pay for Obamas new health care plan never came up. It’s only when Republicans propose tax cuts that, “Well, how are we gonna pay for this?” And the premise is that Washington must break even at least. Whatever tax policy or economic policy emanates in Washington, it cannot cost the government any money. Oh, no. Government must at least break even. Why? Why can’t government shrink? It’s what conservatives believe.
And we’ve heard endless talk about small government, efficient government. But since Newt and the boys, Contract with America 1994, it hasn’t happened. Never happens. Government constantly gets bigger. And if they don’t have enough, they print what they need. All of this is smoke and mirrors. All this is designed to get votes. Here’s Trump justifying the fact that there will not be much, if any, relief at all in the top tax rate…
THE PRESIDENT: Our framework includes our explicit commitment that tax reform will protect low-income and middle-income households, not the wealthy and well-connected. They can call me all they want. It’s not gonna help. I’m doing the right thing — and it’s not good for me, believe me.
THE PRESIDENT: But what is good for me, not only as president and legacy — what is good for me — is if everything takes off like a rocket ship, like it should have for 20 years. That’s good for me.
THE PRESIDENT: That’s good for everyone.
RUSH: Okay. Now, right there is populism. That is pure populism. Some might say it’s liberal. It’s a derivative of Democrat Party class warfare rhetoric. “Our framework includes our explicit commitment that tax reform will protect low-income and middle-income households, not the wealthy and well-connected. They can call me all they want. It’s not gonna help.” So you see, we continue to demonize high earners and high taxpayers. We demonize them. Somehow it’s not fair. So we demonize them, and then we punish them.
When everybody else getting a tax break, they don’t, and this is called “fairness.” What it really is is how to get votes from the middle class. This is a pure populist approach. This is not a conservative approach to tax reform whatsoever. On this one, President Trump is who he is. He is a full-fledged nationalist-populist, and this tax policy indicates that. That’s fine, that’s who he is. I’ve always… I’ve told everybody, “He’s not a conservative. He’s not an ideologue.
“And he thinks that there is great political value in telling the country that the well-connected and the rich aren’t gonna get anything.” He is of the belief that a lot of people react favorably to the news that the rich are gonna get soaked or that the rich are not gonna benefit when everybody else does. That doesn’t promote growth. See, that’s the problem. They talk about this being a pro-growth plan.
I’m just using the numbers here, folks. I couldn’t care less personally, either. The fact of the matter is the growth engine requires people being hired, requires people being invested in small businesses and their growth. And if there’s no incentive, and if the high earners who do all that don’t have any additional discretionary income to hire, if they’re gonna depend on employees to grow the economy… Let’s take a look at it that way.
Gonna depend on employees to grow the economy? Nothing wrong with employees, but employees, by definition, don’t have equity stake. Employees don’t invest unless they buy stock, but I mean the management structure, the employees don’t have any ownership. Something’s gonna have to happen for the employees to have more disposable income so that they can then create this economic activity, but the employees don’t hire other people. They, by definition, get hired.
So if you want growth, you’re gonna have to have the people who hire and who grow and expand, you’re gonna have to find a way to get them more disposable income too. If you leave ’em out, where’s the growth gonna come from? Growth smowth. Any tax plan that comes along that genuinely raises more money to Washington, the Democrats still unilaterally oppose it, because they say the rates are unfair.
So it isn’t about revenue. And, by the way, why would it be? They can print money whenever they want. I think the whole federal budget’s a scam. When we have a $20 trillion national debt and a deficit every year that’s inexorably high with no fiscal discipline at all, why even have a budget? Why even talk about budget constraints when your entity, the government, is just going to print money?
Or you go to the Federal Reserve and say, “You know what? We need $5 trillion funneled to the stock market. We’re gonna cause it quantitative easing. We need to print some money, give it to the stock market, because we want to infuse the stock market with new cash that didn’t cost anybody anything.” And it worked. It grew the stock market. They just printed the money.
So I find all of this, “You need to grow the economy,” of course politicians want to grow the economy. That redounds to their favor if it happens on their watch. But it’s not gonna happen as rapidly here as it could. Now, here’s Schumer. This is classic. This is Schumer, Chuck You Schumer on the Senate floor yesterday. As I’ve said, there are some really good elements in this plan, folks. But listen to Chuck You, listen to the way the Democrats want to deal with this. It’s right out of the playbook.
SCHUMER: What about the deficit? The chief economic adviser to President Trump, Gary Cohn, said the administration believes it, quote, “can pay for the entire tax cut through growth,” unquote, by using a dynamic scoring model. Gary Cohn comes from Goldman Sachs. If he used that funny kind of math at Goldman Sachs, he would have been kicked out. Dynamic scoring is fake math.
RUSH: No, it’s not!
SCHUMER: Income tax cuts with growth is fake math. This idea that the administration can pay for a five to $7 trillion tax cut through growth is simply selling a bill of goods using fake, fake math.
RUSH: It isn’t. Dynamic scoring is exactly what ought to happen. Let me explain this to you again. Static scoring is what the CBO does. So you have the federal budget. And let’s say that — I’m just gonna pick a number ’cause it’s close. Federal budget, $3 trillion. Now, somebody comes along and proposes a tax cut that, on paper, is $1 trillion. And so the static scores, “Oh, my God, government’s gonna lose a trillion dollars and is only gonna collect two trillion?”
So then they have to find a way to pay for it. Well, nothing is static. If you give people in the country a tax cut combined total of one trillion, those people are in fact are going to increase economic activity because they’re gonna have more money to spend or invest or whatever. You’re taking the money out of Washington and you’re putting it back in the economy, there’s only one thing that can happen, even if they save it. It grows the economy. It takes the money out of Washington and grows the economy! But the CBO doesn’t count any of that activity that will take place after people get their tax cut.
They stick there with the static. “Oh, my God, government’s out a trillion dollars!” And that’s when you hear the language, “We gotta find a way to pay for it.” So if they’ve given a tax cut over here to Joe Schmo and his buddies, that’s a trillion dollars, then they’re gonna raise taxes or fees somewhere else to regain that one trillion, and guess what? There’s no net new money in the economy, and government hasn’t shrunk, it’s only grown, and there isn’t any economic growth because there really isn’t any additional money in the economy!
So Chuck You Schumer’s coming along and calling dynamic scoring fake math when it isn’t. That’s common sense. People do things with the money they get. They don’t just put it in a mattress, Chuck! This is how these Democrats lie through their teeth about this. How in the world did Reagan cut taxes from 70 to 28% in eight years and double the amount of money that was created by the tax code? How did that happen? More people were hired. More people were made taxpayers. Taxes increased even though per capita taxes went down. More people paying taxes meant lower per tax payment per person, but the combined total was way up. That’s dynamic scoring. And it’s damn time somebody did it!
Static scoring is stupid! Static scoring is simple-minded. Static scoring is abandoning and denying reality. Dynamic scoring attempts to calculate what’s gonna happen when the economy has a trillion dollars injected into it. Like Obama’s stimulus, which they loved back then when Obama did it. But Obama, he didn’t put it where he said he was gonna put it. He gave it to unions to keep ’em employed. He didn’t build roads, bridges, schools, and all that happy malarkey that he promised.
In fact, it did end up with government. A lot of it went to state governments, state teachers, state this or that. It was a transfer from federal government to state, much of it to unions, which came back to the Democrat Party as campaign contributions. That’s another story. Money laundering scheme is what Obama’s stimulus was. But it makes total sense. If you put a trillion dollars in the economy by taking it away from government, giving it back to people who earn it, that’s a trillion dollars in the economy that wasn’t there. Of course it’s gonna make a difference.
But then the people in government, “Oh, my God, we’re out a trillion dollars. We got make it back.” So they go and they raise somebody else’s taxes a trillion dollars to make up for the loss, which means there isn’t a trillion dollars in the economy. Everything’s a wash. That’s static. And that’s what happens. And that’s why when they do a tax cut that doesn’t pay for itself, there isn’t any growth. There can’t be, the way they do it.
I gotta take a break. This stuff, it ticks me off. It’s been ticking me off for 29 years to put up with this lying, stinking characterizations of the Democrats like this.
RUSH: Okay. We go back to the phones now, people patiently waiting.
Freeport, Michigan. Dale, hello, sir. How are you?
CALLER: I’m great, Rush. How are you?
RUSH: Fine and dandy, sir. You think I’m phrasing something incorrectly. What would that be?
CALLER: You mentioned that people look at you like they don’t believe you when you say that they don’t pay income tax. But people like me, I’m in a similar situation to the earlier caller. I’m a low income, single-income family, and we do get income taxes taken out of our paychecks. We see that every week. The thing is, we get that back at the end of the year in a refund because of the earned income tax credit like you were saying. But those taxes are taken out of my check here in Michigan. People see that every day, so when you say that they don’t pay income tax, that doesn’t compute with what they’re seeing on their check stub.
RUSH: No, I didn’t mean — I’m glad you mentioned that — I didn’t mean people like you who are getting your refund in addition to what you paid. When I talk to my friends, when I talk to anybody, just give them the stat that half of America doesn’t pay it, they don’t believe it. They don’t believe the statistic, no matter who. I mean, some people by now understand it, but I’m saying I would wager you that when I first said it on this program that there were some doubting, “Come on, half of America doesn’t? That’s typical right-wing BS.”
And I was just trying to make the point that it is true. Like Dale said, his taxes are deducted every year, every pay period. but he gets it all back and then some with the earned income tax credit. So when it’s all in, he’s not paying any taxes, even though he’s deducted from every week or every two weeks, whatever his pay period is.
RUSH: I tell you, whenever taxes come up as a discussion topic like this, I am continually amazed at the questions and reaction things I say get. I just checked the email during the break. “Rush, you didn’t pick up on an inconsistency. These people are lying to you. The first caller said that he benefits from the earned income tax credit but that he didn’t pay any taxes during the year. His weren’t deducted. Then this guy, Rush, just said that his are deducted. So which is it? Are these guys lying to you or do you not understand?”
I said neither one of them are lying. The first guy had eight kids, plus him and his wife, and maybe a mistress or two, who knows. He’s claiming at least 10 deductions on his W-4. So given how much he earns, none was deducted because he has all the dependents. The second guy had deductions taken out because he didn’t have nearly as many dependents.
You know the W-4 when you get hired that you fill out? That determines what your deductions are every pay period, how much is withheld. And it’s based on the exemptions you’re gonna get and how much you’re able to deduct per child and dependents in your household. That would be your wife or your husband, depending on who’s the breadwinner. You used to not have to say that but now you have to say that or you get in trouble with the feminazis.
But if you’re making 50 grand, you got eight kids, I guarantee you you’re probably gonna have zip, nothing withheld or very little. If you only have one or two kids you’re gonna have some withheld. But the point is when it all is done for at the end of the tax year, both of them are getting a refund of more than they paid, which in both cases is zero. And that is the earned income tax credit, because they both work. The earned income tax credit was set up as a guise, it was designed to fool Americans into thinking we were going to really incentivize people to go out there and work rather than clip coupons and food stamps.
So the earned income tax credit, if you got a job, if you’re trying to get ahead, if you’re pursuing the American dream, but you don’t earn very much, we will reward you anyway. We’ll assume you earn X and then we will assume you’re paying X taxes on X, and then we will refund even more to you, even though you may not be earning anything we’ve calculated.
The Official Program Observer is looking at me with a querying facial expression. Well, you won’t know if you don’t ask it. Nobody can hear it but me so go ahead and ask it. Hm-hm. Always has rewards. Well, some people will exploit it as a reward, even on the welfare side. The more kids you had, the more AFDC you got, Aid to Families with Dependent Children, the more kids you had. That’s why back in the day poor people kept having kids ’cause every kid you had equaled X-amount of dollars in a federal tax refund every year.
(interruption) Single people do get rewarded. You don’t have to have kids. The kids part of the example is explaining why one of these guys had nothing withheld from his job, his pay, and the other had some withheld. A single person who doesn’t have any kids is gonna have a different W-4, not nearly as many deductions, so his take-home pay is gonna be less because more is going to be withheld. And then at the end of it that will all be calculated, the earned income tax credit will come in and it will calculate all kinds of things.
He’s gonna end up net plus by the time his refund comes in. It will be a refund of what he paid plus some additional, assuming what he would have made if he was — it’s designed to work exactly the way it’s working. And it’s what permits the statistic to be true, that half of the American people paying taxes are not paying any. They may have their taxes withheld during the year, but at the end of the tax year when you file and your refund is in your hands, then the net net is you probably end up with much more in your refund than you paid or owed. And that is the EITC. And it is not referenced.
USA Today says it’s not gonna change. The Washington Post says we can’t find anything on it. I think what I was told yesterday — I asked a bunch of questions about various areas of tax policy for which there isn’t a policy yet, and the answer was, “Well, that’ll be done in the committees.” The ways and means committee, which is where tax law actually ends up being written. Kevin Brady is the chairman of the Ways and Means Committee. That’s the tax writing committee, and that’s where all this stuff is actually gonna get written and then goes to the full House, and then that goes to the Senate. Rigmarole.
RUSH: John in Allentown, Pennsylvania, I’m glad you waited, sir. What’s happening?
CALLER: Hello, Rush. Good day to you. Your comment… You still there?
RUSH: Yeah! Right here.
CALLER: Your comment about revisiting trickle-down and the Apple example of the $5 billion building should be drilled into the 95% of Americans who probably have no idea what you said. So to make a statement: The distribution of wealth is best regulated by the free economy creating and consuming goods and services. I think taxes are a necessary friction to the degree they provide the services that are needed to conduct that consumer — i.e., create and consume goods — and I think we were warned about this by Hamilton way back when. I think it was Federalist 21 where he warned against the excesses of taxes and said that a consumption tax would be self-regulating and we should never tax individuals’ industry.
RUSH: I remember Hamilton rapping about that back then. That’s right.
CALLER: Yeah. Well, that’s all people know. They see the play but have no idea what he actually wrote. So the left, with the tax policies, continues to try to penalize the people who drive the actual creation of goods and services, which ultimately are the things that are consumed, which is what raises everybody’s boat.
RUSH: Well, you just identified Democrat Party tax policy. You tax the achievers. You punish them; you hold ’em up as examples. You claim that they’re benefiting unfairly. Richard Gephardt, a former congressman from Missouri, called ’em “winners of life’s lottery.” Just lucky! Just luck. Some of them are. The Kennedys were examples of lucky. They inherited it.
But studies have been done on millionaires and above, and the vast, vast majority of it came from work, not the Lotto or Vegas or inheritance. You really think that 95% of people who heard me would not understand my point describing what went in the building and designing of Apple’s new headquarters as an example of trickle-down?
RUSH: I guess he… I guess he hung up there. I’ll run through that again, maybe. To me it’s classic example of what an economy, a growing, thriving economy is trickling down. There are any number of examples. I appreciate the call, John.
RUSH: This is Trish in Lexington, South Carolina. Hi.
CALLER: Hi, Rush. How are you?
RUSH: Fine. Thank you. How are you?
CALLER: I’m doing great! Christian fantastical wacko dittos to you, I guess.
RUSH: It’s great to have you here.
CALLER: Thank you I think that part of the problem is they’ve made the tax code so complicated and confusing that people can’t understand simplicity. They can’t even understand what gross and net are. Your first caller… The other thing to look into, Rush, is something called refundable and nonrefundable credits because not only can you get earned income credit, but you can also get a thousand dollars back.
RUSH: You know what I have found, Trish? This is amazing. When it involves getting money back, everybody knows how to do it. Everybody’s figured it out. When it comes to owing, the tax code is as complicated as anything they’ve ever seen. But I get your point.