Trump’s Tax Plans: Good, Bad, Ugly?
Donald Trump wants to cut taxes if he gets a second term. On Thursday, the former president told a group of influential business leaders—Apple’s Tim Cook and JPMorgan Chase’s Jamie Dimon among them—that he supports reducing the corporate income tax from 21 percent to 20 percent. He prefers a “round number,” according to The New York Times.
While that may not seem like a massive difference, it is quite a contrast with President Joe Biden’s tax policy. The 2017 corporate tax cuts are set to expire in 2025, at which point the tax rate would revert to 35 percent. Biden has proposed a corporate tax rate of 28 percent.
Trump’s relationship with business leaders has not always been positive. Many of the gathered CEOs—who met with Trump during a meeting of the Business Roundtable in Washington, D.C., on Thursday—had denounced him in the wake of the Capitol riot. But according to the Times, Trump largely succeeded in reassuring them that he would pursue pro-growth policies.
And while Trump savaged illegal immigration and complained that millions of illegal border crossers would wreck the country, he did express support for high-skilled legal immigration, saying it was a profound mistake to send such people back to their home countries after they are educated in the U.S. These remarks also seemed to please the businessmen. (It should be noted, of course, that low-skilled immigrants are no less vital to the American economy.)
Now for the bad: During a meeting with GOP lawmakers, Trump also floated replacing the income tax with an “all tariff policy“—that is, with taxes on imports. Tariffs that high would be disastrous. According to the National Taxpayers Union (NTU), it would theoretically take a tariff rate of 71 percent to replace the revenue from the income tax. Such a punitively high trade barrier would wreak havoc on the economy—and would dramatically reduce imports, meaning the actual revenue raised would not be sufficient.
The “revenue hit would be worsened by the massive economic disruption a 71 percent tariff would inflict on the economy, the resulting lost exports and global trade war, and the indirect impact of transitioning from a progressive individual income tax system to a regressive import tax system,” writes NTU’s Bryan Riley.
Other economists have reached similar conclusions.
Notes:
1) US imports of goods/services in 2023: $3.8T
2) Federal spending in 2023: $6.1T
3) Imports wld decline in response to high tariffs (likely far below 100%)
4) Tariffs on services wld be difficult, & evasion would be rampant
5) Trump won’t touch entitlementsTough math! https://t.co/N4eTssIGoH
— Scott Lincicome (@scottlincicome) June 13, 2024
Unfortunately, both major presidential candidates are enamored with tariffs. The Biden administration recently announced a 50 percent tariff on Chinese semiconductors, a 50 percent tariff on batteries for electric vehicles, and a 100 percent tariff on electric vehicles built in Chi
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