The President’s actions towards reforming our tax system have been long premeditated. Since he entered the 2016 Presidential Election, in the summer of 2015, The Donald has muddled over the possibility that he could be the next Ronald Reagan of tax reform; introducing, passing, and implementing the largest change in the American tax system since the 1980s.
An ambitious goal, yes, especially since The Donald, a Republican, has been unable to utilize a Republican-dominated Congress in any meaningful way to enact a single one of his major policy goals. The most notable of these failings being to attempt the repeal and replace of Affordable Care Act on three separate, embarrassing occasions in the last nine months alone. However, his tax reform aspirations may be an entirely different story, with a happy ending for very few.
The Trump Tax Plan, which was released in late September, looks exactly like the pinnacle of any GOP tax plan. It includes a 5 percent cut to the top individual income tax bracket, from 39.6 to 35 percent, while in addition doubling the standard tax deduction amount, which further decreases the amount of income an individual may make taxable to the government. Additionally, the plan favors large corporations – also known as the entities most capable of affording substantial tax obligations – lowering the corporate income tax rate from 35 to 20 percent, while also removing multinational corporations’ obligation to pay taxes on overseas profits. The aggregate of these tax cuts is estimated to be $1.5 trillion over the next ten years.
On the surface, to any laymen, this plan sounds nice. All the President is aiming to do is have people lose less money. And with that money, people will be able to spend more and thus stimulate economic growth through individual consumerism. Also, with corporations losing less money to tax dollars, they are able to use this newly freed up money to produce more goods, provide more services, and issue more securities. But that’s not what this does. This plan is nothing more than a tax break for the wealthy and for corporate America, which is unsurprisingly dangerous to the budgetary health of the American government.
If you are unfamiliar with how the government affords to operate (and I do not blame you if you are, as that is not the foremost thought on the minds of most Americans), it’s due to taxes. According to the Congressional Budget Office, approximately 56 percent of all federal revenue is brought in through individual and corporate income taxes. In 2016 alone, that percentage equated to about $1.8 trillion dollars in federal revenue. But as we know, the federal government isn’t the federal government without a little overspending. And with a little overspending comes a little debt. By “a little”, they mean roughly $600 billion in 2016 alone.
Last week, the Senate narrowly passed a budget resolution for fiscal year 2018, which neglected to significantly reduce government spending, while also paving the way for The Donald’s tax plan to come to fruition without approval from congressional Democrats. A $1.5 trillion cut to federal revenue over a decade, while federal expenditures are not expected to decrease and, if anything, increase as they usually do.
If you’re thinking, “that makes no sense!”, you’re not wrong. The CBO is also skeptical, even in being generous. Barring any extraneous circumstances that may warrant even more unforeseen government spending – like wars, inevitable recessions, and fluctuating interest rates – the CBO estimates that the federal deficit will triple under the Trump Tax Plan, to $1.7 trillion by 2027. The total debt amount that the government will be burdened by will nearly double, from $14.7 trillion dollars in 2017 to $27 trillion in 2027. And just when you thought it could not get any worse, under The Donald’s plan, at the end of a decade the federal government will end up spending roughly 34 percent more than they’re making in revenue.
At the very least, this plan is an unmitigated disaster. Proponents of it will point to its ability to increase overall economic growth in America as much as 3 percent, but many economists, such as Brian Riedl of the Manhattan Institute, say that that amount of growth is recklessly optimistic and more than likely will not make up for the budgetary mess that the country will find itself embroiled inside of in a decade’s time.
So, to review: The Donald’s tax plan consists exclusively of tax breaks for the wealthiest Americans and corporations, and will plunge the American government into a trillion-dollar budgetary tailspin from which there is no foreseeable recovery.
Reforming America’s tax system is one of the loftiest ambitions a sitting President can endeavor to strive toward during their tenure. With this ambition should also come the loftiest standards of benefit and virtue for all Americans. However, when a Republican such as The Donald gets the opportunity to drastically alter such an integral aspect of the government and the economy, it had to have been known that it could only go terribly.
Now we are faced with that terrible scenario, in which a man – whose only experience with taxes is dodging them at all costs – now has his tiny hands in the mixing bowl of tax reform. And with the wrong ingredients, the finished product could be much worse than we ever could’ve imagined.