Thursday, April 27, 2017

Trump's Base Will Not Benefit From His Tax Plan

Trump is bragging about his tax plan like he brags about lots of things.  He claims that he is proposing the biggest tax cut in history.  His plan would cut taxes substantially but it won't help most of the people who voted for him.  He offers a few crumbs to some modest income households, but his plan is designed to help people like him.  The plan eliminates the alternative minimum tax which raised his tax rate in 2005 as well as others in his tax bracket.  It eliminates the estate tax, which only affects couples with estates above $11 million,  and he reduces the top corporate tax rate from 35% to 15%.  Some types of corporations are actually taxed at that rate but the effective corporate tax rate is around 18%. They are able to deduct lots of expenses from their gross income.  More than half of our large corporations pay no corporate taxes.

Trump's tax plan will also drastically reduce federal tax revenues.  His advisers argue that the tax cuts will stimulate the economy which will pay for the tax cuts.  That is shear speculation.  Most economists believe that tax cuts have only a modest effect on economic growth.

Trump will do what he usually does to sell his tax plan.  He will lie to his base. He arguing that the tax cuts will create jobs.  That won't happen, but his base tends to believe his lies.  Moreover, his tax plan will reduce federal tax revenues and cause the government to borrow money if it wants to continue funding social welfare programs that protect many of his supporters.  That will cause federal debt to increase dramatically.  Trump promised to reduce federal debt, that he blamed on Obama, during his campaign.  He could care less about that promise.  Some Republicans will use the increase in debt to justify cuts in social welfare spending.  However, most of them only worry about federal debt when a Democrat is in the White House.  We can't expect Republicans in congress to vote against Trump's tax plan.

No comments:

Post a Comment