The additional money left in the private economy by the new tax bill will equal to the penny any additional deficit. That's estimated to be around 100 billion a year. This will appear as private hoards, "savings", which will make its appearance in cash, equities and bonds and be transformed as it circulates in the economy into investment, goods and services that will reappear as cash equities and bonds etc. as the additional fiat money circulates. If this money were to appear on the demand side I would expect some substantial inflation, and soon. But being distributed mostly to the supply side, as it seems it is going to be, I don't think this will be particularly inflationary in the CPI, at least not initially. But of course it will be inflationary within the equities and bond markets. Equities and bonds will continue to rise at rates above their built in 2%. Ultimately, however, almost all of this additional money should make its appearance as inflation. There are two problems I see. One is we don't know how long "ultimately" is, and the other is the distribution of the new fiat money. I think it's distribution will accelerate wealth inequality rather than going the other direction, which is really what we need now. Extreme wealth inequality is socially destabilizing and comes with a host of practical problems. We are going to be making matters worse for ourselves on that front. I see the overall impact of the tax Bill, despite some very sensible features, as a negative. The new tax Bill may assist the Fed in its balance sheet normalization as they sell bonds to hit their Reserve Accounts target. That part of the Tarp money will come back out of the private economy and back into Fed hands. Too bad very little of it will wend its way back to whence it came, the ether. It will be needed by the Treasury to fund the additional deficit and balance the liability of all those bonds the Fed will be selling. Money once it is in the private economy tends to stay there. There is not enough lost in the washing machine to make a dent. The only way to get it back out is to run surpluses, i.e., raise taxes/cut spending, and surpluses repeated are deflationary, and we don't want that. We walk a tight rope between too much and too little. The Fed is amazingly good at it most of the time now, but why do I get the impression Congress hasn't a clue?
If you have read many of my posts related to the economy and taxes you will recall that I am 100% in favor of exactly what you suggest! I have long been an advocate of bringing back many more brackets and taking the top marginal rate back to the neighborhood of 50%, but I certainly wouldn't oppose it going, at least temporarily, as high as say 70% for dollars earned over 100 million or so. I would couple that with a reduction in the lowest two marginal rate brackets. I am a believer that everyone should pay exactly the same rate on the same dollar earned regardless of it being earned or unearned! So Michael Bloomberg and I, and you too, should pay exactly the same rate on our first dollar of adjusted gross, namely zero, and we should pay exactly the same rate on our one-hundred-millioneth dollar earned, namely 50% or 70%, or whatever.* But it should be exactly the same for all of us! We should pay the same rate on earned versus unearned income as well. That is to say, there should be no distinction. I know the arguments for taxing unearned income at lower rates. They are mostly unfounded. However I am willing to throw a bone in that direction and say, "well then, bracket unearned income too and just start the first bracket a notch higher." We absolutely must start leaving a little capital with what's left of the lower half of the middle class, and provide some incentive to work hard, even among the poor. To achieve that we must lower the tax rate significantly for these brackets. Our current tax structure is destroying both incentive and opportunity among the poor and lower middle class. That bodes ill for our country's future, just as letting our public school system deteriorate does. I say all this as a very fortunate member of the top 10%. I am profoundly grateful for both the opportunities I have been handed through chance of birth and upbringing and for the opportunities I have made for myself and taken advantage of through diligence and hard work.. We are denying those same opportunities to far too many. ____________________ * The beauty and fairness of the progressive tax structure is that it does exactly this. Our current problems are in no small measure due to the severe collapse in the number of brackets, and therefore collapse in the rate structure that occurred as a result of bracket collapse during the Reagan era -- a collapse we have never quite recovered from. That was based on ill founded supply-side economic theory. The normal pattern is for wealth to accumulate at the top because the return on capital is greater than economic growth. Tax structure must therefore take this into account and counter the natural trend, or over time society is destabilized. What Reagan's trickle down economics accomplished was a great acceleration of the normal trend. The effect is compounded with time. We see the compounded result today. We must act to counter this or our days will be numbered. Not mine, I'll be dead. But you should be concerned.
I take it you like the Trump tax proposal? That would put you in the minority on this board. FWIW, I like it too.