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On Donald Trump’s Confusing Explanation of His Tax Reform Strategy
Donald Trump has put forward a rather detailed tax reform plan. It has already been scored by several organizations, including the Tax Foundation and the Tax Policy Center. Some on the right, including “supply-siders,” have praised the Trump plan for its deep reduction in marginal tax rates on both the personal and corporate side. As I recently wrote for The Week:
Economist Arthur Laffer — the Reagan-era godfather of supply-side economics — says the Trump plan “sounds great” to him. Indeed, Laffer just told The Washington Post that he thinks Americans will find it so compelling that it will help sweep Trump to a landslide victory in November. (Perhaps the first-ever dynamically scored political forecast.) Economic commentator Lawrence Kudlow, another Reaganite supply-sider, calls it “an excellent plan that would substantially grow the American economy.”
Critics have pointed out that the Trump plan would lose trillions in revenue at a time of high government debt. What’s more, Trump claims his tax cuts would pay for themselves through faster economic growth, which seems highly unlikely.
Trump did little to answers questions or concerns on CNBC today:
When you put out a tax plan, you are going to start negotiating. You’re not going to say, okay, this is our tax plan, lots of luck, folks. There’s going to be negotiation back and forth. And I can see that going up, to be honest with you. and I know i am talking to your folks but, you know, in all fairness we are cutting. And during a negotiation I could see that going up. I don’t want middle to go up at all. But I could see that going up. and I think that probably will happen, because it’s a cut for everybody.
OK, where to begin? Trump seems to suggest a willingness to raise taxes on somebody to get a deal. Maybe it’s just the rich, or maybe it’s middle-class, too. Much depends on the meaning of the word I boldfaced, “that.”
Either way, raising top tax rates would be disappointing for supply-siders since the top marginal rate — especially on top earners — is a key economic lever for them. Oh, but isn’t Trump already raising tax rates on some rich folks, hedge fund managers, by taxing carried interest at higher ordinary rates rather than at preferred investment rates? Not so clear, according to the TPC:
Another consequence of the lower top rate on pass-through income is that carried interest would be taxed at a much lower rate than under current law, notwithstanding its reclassification as ordinary income (rather than capital gains), because the entities that earn carried interest income are organized as partnerships. Under current law, such income is taxed as capital gains, generally at a rate of up to 23.8 percent, including the Affordable Care Act surtax on investment income. Under the Trump plan, that income would be taxed at a top rate of 15 percent, a reduction of more than one-third.
In any event, perhaps a clarification will be forthcoming.
Published in Economics
Now that he has the Republican nomination, he doesn’t have to honor things that he said and no one can make him. And it may be too late for anyone to stop him.
This is why I think it is good that Ted Cruz suspended his campaign and disappeared from the stage like the others.
Leaving Donald Trump alone in the spotlight is like setting a drunk on tall horse with a short rope, pointing it at the forest, and hitting the horse in the ass.
A lot of people that voted emotionally for him will now hear sound bites about how their taxes may go up so the deal maker can get deals done and the complexion of this changes before July.
Interesting. But the primary season so far finds me skeptical that anyone’s tax plan will be the hinge on which the general election turns.
Arthur Laffer and Larry Kudlow like his plan and that is strong praise in my book.
You said it!
I agree. Although I’m not a Mike Huckabee fan, I really liked the sound of his tax reform plan from 4 years ago. But no president is ever going to get even half of what they want regarding tax overhaul, so it makes little sense to use that issue as the thing that makes up your mind on which candidate to support.
Your wry wit is very much appreciated sir. Bravo.
I doubt Trump can follow any policy goal through Congressional review, etc.
All that will happen will be sound and fury, and a more-complex and constrictive tax code on the other side. That is what always happens, and will continue to happen unless and until both the President and Congress are deeply committed to wiping the slate clean and starting again with a simple and transparent tax framework.
I am going to keep pounding the drums for secession. I don’t see the political will for a flat tax, or a repeal of the income tax paired with a sales tax, or even just revoking withholdings and making tax day in November, so voters feel the pain directly and respond accordingly.
“On Donald Trump’s Confusing Explanation”
Could have stopped right there.
Well, an increasingly complex and constrictive tax code doesn’t always happen. Remember that one time, we did that one thing, with that one guy . . ..
You remember, back in 1986.
Boy do I miss the Gipper.
But his watch is ended, and I fear that we shall never see his like again.
Did Reagan really simplify it that much? Look at the number of pages in the Tax Code, and I’ll bet they went UP under Reagan, not down.
Reagan did lower the tax rates, I’ll grant you.
I would only add that I miss the cultural and political climate of the Gipper years as well. I have serious doubts he would have won the presidency today.
Kudlow is a personal friend of Trump’s, which is fine, I suppose. When was the last time that you heard Laffer’s name?
And, as the O/P points out, everything is negotiable. I would not assume that his plan is his plan.