Tag Archives: U. S. tax code

The New York Times Posts A Favorable Opinion Article About Donald Trump

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Wow. The opinion page of the New York Times today posted an article entitled, “Why This Economy Needs Donald Trump.” The article was written by David Malpass, a senior economic adviser to the Trump campaign.

Mr. Malpass explains:

There is no doubt who has the better plan. Our economy is growing at only 1.1 percent per year, a fraction of our average rate, and the Congressional Budget Office forecasts just 2 percent annual growth (in inflation-adjusted gross domestic product) for the next 10 years.

Yes, we went through a deep recession, but it ended in 2009. The recovery has been the weakest in decades, and the first that has actually pushed median incomes down. Business investment and profits are lower now than a year ago. Counterproductive federal policies squash small businesses with inane regulatory sprawl that affects hiring, taxes, credit and medical care.

The result is a stagnant economy that leaves out millions of Americans who would like to work and get ahead, and a devastating report card on the Obama White House.

To restart growth, Mr. Trump would immediately lower tax rates, including for middle-income voters, and simplify the tax code. Americans would be able to exempt average child-care expenses from taxes, and Mr. Trump’s administration would eliminate the death tax, which falls especially hard on some small businesses and farmers.

The article goes on to explain that simplifying the tax system while reducing corporate taxes and eliminating or capping many tax deductions would make us more competitive in the world market and create jobs in America. Mr. Malpass contrasts this with Hillary Clinton’s plan to raise taxes, creating an noncompetitive corporate tax rate and discouraging investment with higher estate and capital gains taxes. Obviously Mrs. Clinton is not familiar with the Laffer Curve. This is a picture of the Laffer Curve. What the curve illustrates is that there is a point of no return in raising taxes where increased taxes no longer result in increased revenue.LafferCurveMr. Malpass also points out that Donald Trump wants to halt the negative impact of federal regulations on business. These regulations represent a hidden tax that increases the cost of doing business so that the consumer is forced to pay higher prices for goods. Government overreach is expensive.

The article concludes:

Voters will have an opportunity to decide for or against a government that’s failing on health care, taxes, trade, cost control and regulation. One candidate wants higher tax rates. The other would lower them. One candidate thinks the economic recovery has been successful whereas the other thinks it left millions of Americans out. One candidate has spent her lifetime seeking the presidency. Mr. Trump hasn’t.

As Thomas Jefferson said, “A little rebellion now and then is a good thing, and as necessary in the political world as storms in the physical.” It’s time for one now.

Agreed.

One Of The Problems In Reforming The Tax Code

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Yesterday the Wall Street Journal posted a story which might explain some of the difficulties Congress and the President are having in reaching a budget agreement before going over the fiscal cliff. The current American tax code is currently approximately 6,000 pages and 500 words. To say that it is difficult to navigate is a serious understatement.

One of Speaker of the House John Boehner‘s suggestions has been a limit on annual deductions. During the election campaign, Mitt Romney suggested a deduction cap somewhere between $17,000 and $50,000 a year.  Many liberal pundits supported the idea as representing equity. However, now that the election is over and the idea is examined more closely, there are serious consequences to this change–many of those consequences are political.

The article reports:

…For example, 44% of Connecticut filers itemize their deductions, but only some 21% of North and South Dakota residents do.

One tax writeoff in particular illustrates the point: the deduction for state and local income taxes. This allows a high-income tax filer who pays, say, $20,000 in state and local income taxes to deduct those payments from his federal taxable income.

Because the highest federal tax rate is 35%, the value of the state and local deduction is enormous for high-tax states. If President Obama succeeds in raising the federal tax rate to 39.6%, the value of those deductions rises to nearly 40 cents on the dollar. This deduction certainly eases the pain of New Jersey‘s 8.97% top tax rate, or Hawaii’s 11%.

The article explains that five states accounted for nearly half the tax revenue lost because of the state and local tax deduction–California, New York, New Jersey, Maryland and Massachusetts. California accounted for $51 billion of the writeoff due to state and local tax deductions. All of those five states can be found in the Democrat column during national elections.

The article explains:

To put it another way, when Californians voted to raise their top rate to 13.3% last month, they were voting to reduce revenue for the federal Treasury and thus increase the political pressure to raise tax rates on all Americans. The state and local tax loophole helps disperse and disguise the real cost of big government. As Mr. Obama likes to say, this is reverse Robin Hood.

The article concludes:

Mr. Obama wants to raise tax rates, rather than eliminate deductions, so his fellow Democrats can keep raising state and local taxes without bearing the full economic and political cost. Tax equity and economic growth are the big losers.

Because the current tax code is so politically loaded, I really don’t see Congress and the President agreeing to change it significantly. Unfortunately, it needs to be changed significantly.

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