Politics

Trump Is Right. ‘Our Tax Code Is a Giant, Self-Inflicted Economic Wound.’

tax code economicIn his second speech in two weeks on the need for tax reform, President Donald Trump again made a strong case, explaining that “our tax code is a giant, self-inflicted economic wound.”

This time speaking in North Dakota, the president reiterated his four key goals for updating the broken U.S. tax system: a simplified tax code, a middle-class tax cut, a more competitive business environment, and the ability for business to bring home trillions of dollars of overseas profits. To this list of goals, I would also add full expensing as a critical reform.

The president’s first goal is “a tax code that is simple, fair, and easy to understand.”

To meet this goal, tax reform must eliminate tax subsidies. The tax code should not be used to pick winners and losers. That means tax reform should eliminate as many individual and corporate deductions, credits, exclusions, and exemptions as possible.

The current collection of privileges in the tax code make it so those who can afford accountants and lawyers to navigate the code are able to benefit, while every other American merely files their taxes and hopes for the best.

Cronyism in the tax code not only slows economic growth, but also increases complexity and makes the tax code unfair.

The president’s second goal is to “cut taxes for middle-class families.”

This one is simple. Tax reform must lower tax rates for individuals, allowing Americans to keep more of their own money.

For individuals and most small businesses (who pay their taxes as individuals), the top marginal federal tax rate can be as high as 43.4 percent.

Individual tax rates are too high. In addition to keeping more of our own money, lower rates would strengthen the economy by improving incentives to work, save, and invest.

Lowering rates should be paired with eliminating many current credits and deductions. The state and local tax deduction, for example, forces federal taxpayers in low-tax states to subsidize taxpayers in high-tax states.

Federal income tax rates could be reduced by about 12.5 percent for everyone if the state and local tax deduction was eliminated.

For his third goal, the president advocated “a tax code that restores our competitive edge so we can create more jobs and higher wages for American workers.”

The most effective way to create more jobs and higher wages for Americans is to allow a simple reform called full expensing.

The United States has an outdated and overly complex system that makes it near impossible for businesses to deduct the full cost of new investments—the type of investments needed to turn new and innovative ideas into productive businesses.

That’s the type of entrepreneurship that has historically set America apart from the rest of the world.

But our current tax system artificially raises the cost of investing in new entrepreneurial ideas and business expansion by denying a full deduction of the investment cost.

A system that allows full expensing would let businesses deduct all investment expenses from their taxable income immediately, such as the cost of new office space needed to hire additional workers.

This simple change could grow the economy by more than 5 percent over 10 years because expensing would eliminate part of the current tax code’s bias against investment.

The president’s fourth goal is to “bring back trillions of dollars in wealth that’s parked overseas and just can’t come back.”

The United States has the highest corporate tax rate in the developed world, with an average combined federal and state rate of almost 40 percent. Compared to China’s 25 percent or Ireland’s 12.5 percent, the U.S. offers one of the least attractive tax business environments in the world.

To make matters worse, the high U.S. corporate tax rate is imposed on income earned in other countries, encouraging businesses to keep trillion of dollars overseas. The combination of the worldwide tax, imposed at internationally high rates, makes U.S. business uncompetitive relative to the rest of the world.

America-first tax reform should focus on making the U.S. the most attractive place in the world to do business, rather than punishing those who choose to do business elsewhere through minimum taxes or forced repatriation.

From - The Daily Signal - by Adam Michel

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11 Comments on "Trump Is Right. ‘Our Tax Code Is a Giant, Self-Inflicted Economic Wound.’"

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I love the sound of “making the U.S. the most attractive place in the world to do business”. This can be done only if the tax structure becomes favorable to those who put their assets at risk to start and grow a business. My very small business paid 30-40% in taxes in a state with a high cost of living, and during the Obama years, my business was gradually run into the ground. And, although I paid double Social Security taxes, I couldn’t give myself a pension or a matching 401(K). President Obama had a disdain for business, profit and competition, and I remember hearing him say in a television interview, something like “Private money/Public money: what’s the difference?” There was no getting over that obstacle. Simplifying the tax code is a good start. I hope the home mortgage and charitable donation deductions will remain, if only to incentivize home… Read more »
Very well said Kim. Most people who have owned or run a business understand all this. In almost all cases, the small business owner is the one paid last, if at all, at the end of the day. The government (taxes, fees), the bank, suppliers, employees, etc. all have to be taken care of before the owner gets paid. That is, if there is anything left over at the end of the day. If not, meaning no actual profits, then too bad. That’s how it works. So the federal government should only get the bare minimum it needs to fund the limited enumerated outlined in the Constitution. Not a cent more. Everything else is a State’s Rights issue. So if the people in a certain state want to run a glorified welfare state, which of course requires very high tax rates on the productive class to fund those generous hand-outs,… Read more »

If Obama believed “Private money/Public money: what’s the difference?”, he should have eliminated public money [taxes] and took to earning a living, where people can elect to pay you for your services, or not. It underscores his ignorance of managing a country.

Sorry Kim, but if we start asking for “just a few” subsidies to remain, none will be cut. IF there ever was to be reform where subsidies and tax breaks were removed, along with a reduction in rates, there would be far and away enough money in people’s pockets to withstand the loss of the mortgage deduction, and the charitable giving deduction. But this will never occur if we just keep asking politicians to do this for us. They would never vote against their own self-interest and endless money supply. That’s why I’m a proponent of an Article 5 Amendment Convention, to allow some of the government’s overreach to be reined in and confined again.

Our tax code may be “a Giant, Self-Inflicted Economic Wound”, but it is exactly what our self-serving political leaders want it to be. It suits THEM.

Republicans claim to have wanted to clean up our horrible system of convoluted taxes for decades. But, now that the opportunity is at hand to do so, they balk. They resist. They refuse to work with the President.

Read the “45 Goals of Communism in America” to find out why. Especially item #15.

It’s far past time to accept the fact that we are being taken down from the inside and our own leaders are doing it. ALL of them save a faint few. That Deep State Swamp is far deeper than the average person could possibly imagine.

If you can’t find the 45 Goals on the net reply and I’ll post them here. They’re VERY educational!

I am concerned by your statement, “Lowering rates should be paired with eliminating many current credits and deductions. The state and local tax deduction, for example, forces federal taxpayers in low-tax states to subsidize taxpayers in high-tax states.” While I agree with it, I am concerned because I live in a state that had no state income tax. For years, the exact thing you state is true, we had NO deduction in our state while people living in high-state income tax states could deduct such from their income. Finally, we gained recognition that we pay through high sales taxes, so we began to be allowed to deduct these taxes to have some parity with the other states. Recently, this became permanent. After all the hard work to make it a permanent part of the tax code, I would hate to see it swept away UNLESS both the income tax deductions… Read more »

I CAN’T SEE THESE REFORMS DOING ANYTHING BUT “GOOD” FOR THE PEOPLE OF THE UNITED STATES. AS I AM SURE YOU ALL REALIZE, WHILE WE ARE CALLED THE “UNITED” STATES RIGHT NOW WE ARE FAR FROM BEING UNITED. I SEE THE PROBLEM BEING THAT THE LIBERALS IN THE GOVERNMENT, AS WELL AS THE LIBERAL PEOPLE IN THE COUNTRY, THINK THAT THE GOVERNMENT CAN BEST TELL US HOW TO SPEND “OUR” MONEY. THEY BASICALLY WANT US TO SEND ALL OUR DOLLARS TO THEM, AND THEY WILL GIVE IT BACK TO US AS THEY SEE FIT. THAT’S NOT THE WAY IT WORKS. THEY ARE NOT GETTING ALL MY MONEY WITHOUT A FIGHT!!!

The U.S. is the highest tax country, thanks to the liberal, socialist activities that kept taxes high to pay for the many entitlement programs that were instituted from 1986 to the present. The Federal Reserve supported those programs by financing the ridiculous programs with printed dollars from 1971 until today. The only way that our country can crawl out from its debt is to reduce spending and lower taxes for individuals and companies. With lower taxes, reduced spending, and reduces regulations there is a chance that the U.S. can become great again as it was at the end of the 1980s.

Thank you for highlighting key points regarding our tax system which is designed to prevent true prosperity.

by us passing the (fairtax.org) we not only solve these problems. but, also get rid of the IRS. nothing could be better than that.

He has to bring back credit card,loans and all that Reagan took from us. Let us deduct interest rates again. He must get control of the banks that are living off our money,get rid of the IRS,and stop the pharmacy companies ripping us off for meds. Also the dmv,car dealers and the food corps that lowered the amount of product and charging more. This country has become a disgrace to all Americans. Last, stop Hollywood from making a jerk of our president. Stop the protesters,no matter who they are.

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