The Trump tax plan is currently under investigation and, some keen analysts are finding, could do more to revitalize the economy, lift up the poor and middle class, and simplify outrageous complexities than anything seen in a long, long time. That’s simply intolerable by the standards of many in D.C. and must stop now, we’re told.
The Democrats, for instance, don’t like it because the well-off will profit, too, as in lowering corporate taxes from the developed world’s highest. The thing is, the average Joe and Jane mostly pay those taxes with fewer jobs, lower wages, higher prices and lower economic growth rates.
That last item is huge because, as Trump adviser Stephen Moore has observed, we desperately need something better than the miserable, cough, cough, limp-along 1.6 percent growth rate in President Barack Obama’s last year in office. But this year, with good news possibly just around the corner, corporations have been thinking big again. Their profits are up, stocks are up and the growth rate hit 3.1 percent in the second quarter.
We’ve also got high consumer confidence and lower unemployment. Of course, the happier days may not be just a consequence of President Donald Trump’s tax ideas, regulatory rollbacks and unleashing of our energy resources. But it truly is the case that we are talking about making our corporations more competitive internationally, likelier to stay home, foreigners likelier to invest more dollars here and the whole nation profiting.
It will also be the case under the plan, by the way, that money made overseas will be coming back (maybe as much as $2.5 trillion) without the kinds of taxes that keep it abroad, and that feeds the economy to everyone’s benefit even if some say a lot of that money just goes to shareholders. Those shareholders invest and spend, which benefits one and all, and the lion’s share would be going to pension funds known to serve many people without mansions in Beverly Hills.
There’s a whole lot more here, of course, such as vastly simplifying individual and family income taxes, getting to just three basic rates, expanding child tax credits and getting rid of deductions for state and local taxes. Some love those deductions and don’t want to see them go, but step back and consider how it works. The states that tax the most get the most deductions, it has been observed. That means lower-tax states are in effect subsidizing higher-tax states whose representatives in Congress love that system and in some cases are willing to sacrifice the rest of us to maintain it.
Lots of loopholes of various kinds will go away as we get higher standard deductions and what that means is the lobbyists are coming. They would much rather have special interests conquering the overall public interest, even if it means keeping tax-form confusion intact. The business of figuring out what exemptions you have and do not have and all the rest ends up costing a lot of money, $165 billion a year, it is said, and it would be nice to skip some of that pain.
The plan lacks lots of details because that was left up to Congress, not such a bad idea if the members do their job, and it is not a horror to me that some Republicans are questioning the possible added budget deficit here. They should think it through and take care through compromises if necessary while not forgetting what a truly well-constructed plan can do.
As former U.S. Sen. Phil Gramm and Michael Solon of US Policy Metrics have written in the Wall Street Journal, the combined tax cuts of President Ronald Reagan increased federal revenue by 19 percent during his time in office while blessing the later years of his tenure with 4.6 percent growth. A percentage point less than that could do wonders this time around.