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First, this is not a political post. I am only interested in the economic aspects of Trump's proposals.
His plan would reduce tax collections by over $10 trillion over 10 years, lower the top bracket from 39% to 25%, and effectively excuse all married couples making $50,000 per year or less from tax liability. Corporate taxes would be slashed from 39% to 15%. Trump claims his plans are revenue neutral.
I see only two ways to make his plan "revenue neutral" -- one is an unshakable belief that "trickle down" theory will work to stimulate growth and jobs, even though trickle down's prior implementations have had at best mixed results. The other way must involve deep spending cuts, but to achieve that would require deep cuts to the military or entitlements such as Social Security and Medicare (because that's where the bulk of spending is).
I see no middle ground if these proposals are implemented: the US either explodes with growth, jobs and prosperity as overseas money is repatriated and invested at home, or Trump's plan fails and we descend into massive deficit spending and careen towards a debt crisis.
Lowering corporate taxes would help. If you can induce more companies to operate inside the USA, that will provide more jobs. Lack of jobs is currently a problem in this country. So that is in the plus column. Corporations generate more taxes than just their corporate taxes. Corporations pay dividends and those are taxed from the individuals who earn those dividends. The money is taxed twice. Once when it is earned and again when it is dispersed. Then corporations hire employees and employees pay taxes on their paycheck. If there are good jobs,then employees buy houses and pay property taxes.
I suspect that married couples earning less than $50,000 a year probably aren't paying federal income taxes right now. So that would be a zero effect. Roughly a third of Americans pay no federal taxes at all. Personally, I think it would be better to move the third of the population that doesn't pay taxes back into the tax paying population, but it is unlikely that anyone is going to ask me to run the country.
I see only two ways to make his plan "revenue neutral" -- one is an unshakable belief that "trickle down" theory will work to stimulate growth and jobs, even though trickle down's prior implementations have had at best mixed results. The other way must involve deep spending cuts, but to achieve that would require deep cuts to the military or entitlements such as Social Security and Medicare (because that's where the bulk of spending is).
I guess you didn't read the plan. It has nothing to do with "trickle down."
Also, Social Security is not a federal budget item, in spite of your claim.
Quote:
Originally Posted by Elliott_CA
I see no middle ground if these proposals are implemented: the US either explodes with growth, jobs and prosperity as overseas money is repatriated and invested at home, or Trump's plan fails and we descend into massive deficit spending and careen towards a debt crisis.
You ignore the fact that the plan simplifies the tax code, resulting in a smaller IRS. $1TRILLION in pork and waste can easily be cut from the federal budget without affecting the economy.
If those cuts in spending do not materialize, then yes, some have estimated that the federal debt could increase by about 80% of GDP by 2036 (most notably the liberal Brookings Institute).
Lowering corporate taxes would help. If you can induce more companies to operate inside the USA, that will provide more jobs.
No, that would only keep some companies from leaving the US in the short term.
The name of the game is no longer gaining Market Share in the US. The game is about gaining Global Market Share.
In order to get Global Market Share, you have to be able to sell your products to the other 6.5 Billion people on Earth.
If you want Market Share in Romania, where the minimum wage is $1.40/hour, then you have to manufacture your product in Mexico or China or soon-to-be in India, or you have to open a plant in Romania, like P&G and others have done.
Without Global Market Share and Profits, you end up like Zenith and the rest of the US corporations that failed.
I think it has to be a perfect storm to work. I don't think we have the economic climate to make this work.
Quote:
Originally Posted by Mircea
I guess you didn't read the plan. It has nothing to do with "trickle down."
Also, Social Security is not a federal budget item, in spite of your claim.
You ignore the fact that the plan simplifies the tax code, resulting in a smaller IRS. $1TRILLION in pork and waste can easily be cut from the federal budget without affecting the economy.
If those cuts in spending do not materialize, then yes, some have estimated that the federal debt could increase by about 80% of GDP by 2036 (most notably the liberal Brookings Institute).
Yes and what about the jobs for those former IRS agents and tax preparers who would now be out of work? I assume many would need some sort of assistance that is if they cannot get work or while they train for new work. May not be one trillion in "pork" but it will cause a drop in revenues until they find replacement work.
I guess you didn't read the plan. It has nothing to do with "trickle down."
Also, Social Security is not a federal budget item, in spite of your claim.
You ignore the fact that the plan simplifies the tax code, resulting in a smaller IRS. $1TRILLION in pork and waste can easily be cut from the federal budget without affecting the economy.
If those cuts in spending do not materialize, then yes, some have estimated that the federal debt could increase by about 80% of GDP by 2036 (most notably the liberal Brookings Institute).
Yes, 1 trillion can just MAGICALLY be cut from the budget. And that 30% drop will just do NOTHING. Right?
I see only two ways to make his plan "revenue neutral" -- one is an unshakable belief that "trickle down" theory will work to stimulate growth and jobs, even though trickle down's prior implementations have had at best mixed results....
...I see no middle ground if these proposals are implemented: the US either explodes with growth, jobs and prosperity as overseas money is repatriated and invested at home, or Trump's plan fails and we descend into massive deficit spending and careen towards a debt crisis.
Trumps "plan" is for entertaining morons.
Trickle-down can only "work" if we are in an environment where the economy is lacking investment funds (potential capital), rather than lacking demand. More than any time in history, we are lacking demand and have a tremendous excess of investment funds.
Actually trickle-down never works. We've never lack the capital for investment. The reason it seemed to work in the 80s was because costs were lowered by offshoring, and demand was goosed by debt escalation and an increase in workforce participation (women).
Yes, 1 trillion can just MAGICALLY be cut from the budget. And that 30% drop will just do NOTHING. Right?
No, its not a economically viable plan.
I totally agree. 40% of US GDP is directly or indirectly attributed to government spending of some sort.
If the US leaders are serious about jump starting the economy, they need to face the fact that in order to do that, the US needs to have a net inflow of money (positive trade balance). That will generate wealth here by taking it from elsewhere. That is the only way to improve the economy as a whole, and "lift all ships".
Wages are stagnant, and increasing wages makes the US less competitive globally. The only other way to increase disposable income for workers is to reduce their tax load.
The tax plan sets the standard deduction to $25,000 for single people and $50,000 for joint returns.
Roughly 45 Million households would end up with about $86 Billion in their pockets.
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May not be one trillion in "pork" but it will cause a drop in revenues until they find replacement work.
