A Trumped Economy = An Isolated Economy

Andrea Martinez – Honorbound

The year of 2016 is an election year bringing in new candidates for presidency with new policies they want to propose and put into action. One candidate in particular seems to bring up some economic proposals that will result in a more isolated U.S. economy and a raise in corporation economic power.

Who? You might ask. The one and only, Donald Trump.

Trump has proposed a complete renovation of the tax code and a massive reduction in the taxes paid by both individuals and corporations. How or whether the Trump tax cuts will be paid for is unclear, but broadly, his tax plan would significantly lower marginal rates, make the tax code flatter, less progressive, scale back deductions, and other tax breaks.[1] More specifically, the most significant proposed tax changes for individuals include: replacing the current seven personal income tax brackets with three and reducing the top marginal rate from 39.6% to 25%.[2]

All taxpayers receive a tax cut under Trump’s plan, but most of the cuts go to those with the highest income. High income and wealthy households will benefit substantially from the lower marginal rates on income, dividends, and capital gains. The alternative minimum tax and estate and gift taxes will be eliminated.

Trump’s tax plan will create complications. In his policies, he is allowing pass-through businesses, which are currently taxed at personal tax rates, to instead be taxed at a lower corporate tax rate. Without additional rules, enterprising individual taxpayers would be able to become pass-through entities to take advantage of the lower rates.[3] The tax code under Trump’s plan will thus be much less progressive than the current tax code. The problem with this is that the majority of the citizens in the US are not high enough on the income scale to benefit from such tax cut and this plan will only push the wealthy higher than they are now.

Charles Wheelan addresses in his book Naked Economics that “companies shielded from competition do not grow stronger; they grow fat and lazy…The result being a “largely self-imposed economic exile” (Wheelan).[4] Trump, being a CEO of a corporation, understands that these tax cuts will benefit him and all other corporation CEO’s because less tax rates means more money being fed into the corporation to be used for increased employment and other production costs which, although being good for the economy, leaves many corporations without competition due to their greater amount of wealth. So if there is no competition for these corporations, then there isn’t much need for more investment in employment and production costs because there is no push to better your stance. This leaves money in corporations instead of that money being put to play somewhere else; therefore, helping the wealthy and not those in need.

So do I believe that all individuals will benefit from Trump’s economic policy of cutting marginal taxes? No.

[1] Nunns, Jim. “Analysis of Donald Trump’s Tax Plan – Tax Policy Center.” Tax Policy Center. December 22, 2015. Accessed October 20, 2016. http://www.taxpolicycenter.org/publications/analysis-donald-trumps-tax-plan/full.

[2] “Tax Plan | Donald J Trump for President.” Trump, Pence, Make America Great Again. Accessed October 20, 2016. https://www.donaldjtrump.com/policies/tax-plan.

[3] Ibid 1

[4] Charles Wheelan. Naked Economics: Undressing the Dismal Science [New York: Norton, 2010], 305.

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