Capital Record Episode 241: Not All Tax Cuts Are Created Equal
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Jul 15, 2025 The discussion unpacks the controversial One Big Beautiful Bill Act and its tax cuts, critiquing their effectiveness in controlling deficits. The hosts dive into intriguing proposals like no taxes on tips and overtime wages, questioning their true growth potential. They also explore deductions for auto loans and bonuses for seniors, highlighting the complexities in tax policy motivations. A comprehensive look at nearly 50 years of supply-side tax principles reveals the tension between incentives for production and politically targeted tax cuts.
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Supply-Side Taxation Explained
- Supply-side tax policy aims to minimize impediments to productivity and incentivize production of goods and services.
- Lower tax rates historically correlate with greater productivity and sometimes higher revenue.
Political Tax Cuts Distort Markets
- Selective tax cuts like "no tax on tips" distort the tax code by favoring one sector over others with similar income.
- Such politically motivated cuts contradict the supply-side mantra of broad tax bases with lower rates for all.
Overtime Tax Cuts Are Inequitable
- Favoring overtime wages with lower tax rates ignores the fact that overtime pay already compensates for extra effort.
- This approach can incentivize companies to game the system, contrary to supply-side principles.