Trump's Tax Plan

Looking at the Trump Tax Plan, what grabs you is how the corporate rate is similar to Ted Cruz’s business tax rates, which were proposed in the primary, and how similar Trump’s individual tax plan is to Marco Rubio’s while still being family friendly. 

Business tax has been cut from 35% to 15%, with switches to territorial system with the idea of encouraging United States corporations to stay here while ditching the border adjustment taxes.

The individual tax rates will be reduced to three rates from seven rates; 10%, 25% and 35% with more generous family deductions along with expanded child care benefits. This tax reform is similar to plans proposed by Marco Rubio, including not just reducing the rates but increasing deductions that allows many middle class families to have more money back in their pockets. 

Many deductions, such as state and local tax deduction, are eliminated while others, like mortgage interest, will stay. The former deduction benefits high tax, blue states. There will be a fight over this but blue state politicians have been able to increase taxes, knowing that many of their high-income voters could use this deduction to offset the higher taxes. 

For individuals, marginal tax rates are not significantly reduced at the upper end but the lower tax rates combined with higher deductions for families will lower tax burden at the lower end.  The corporate tax reduction is significantly lower, as it is more than half of the present rate, and the United States will go from being the highest among the developed nations to one of the lowest.  

This corporate rate will encourage money overseas to come home and reduce the urge for companies to move overseas.  Lowing the corporate rate should not be controversial since even Obama proposed a lower corporate in 2013. 

The lower tax rates will increase government revenues as this will encourage economic growth and open up more income for taxation. The other benefit is that as companies improve their bottom line and can safely plan for the future, their workers will eventually get raises and see their income go up.

Lower corporate tax rates allow American business to compete successfully internationally and give them reason to build manufacturing at home. When businesses invest their profit and entrepreneurship, this creates jobs and increases opportunities for workers. 

Trump’s tax plan is a good start but the plan introduced still has work to do since Trump’s administration left many details still undecided, including which level of income the tax rates take effect.

We can only estimate what growth will occur based on past models and the question is what is the impact on the budget deficit. While growth should occur with the tax plan and this should reduce deficit, Congress and Trump still must reduce spending or freeze overall spending to continue deficit reduction

Trump's tax plan is hardly a radical statement since much of the reform had already been proposed by others and even Obama’s own commission on deficit reduction recommended lower tax rates. Trump’s plan’s highest rate is higher than even the Obama commission. There is a consensus that our corporate tax rate is too high and Trump’s reform is a step in the right direction. 

Tax reform will not relieve Congress and Trump from restraining spending to lower the deficit and national debt but tax reform will aid in expanding the economy and increasing tax revenues. 

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