The White House and congressional Republicans have released their tax plan that President Donald Trump boasts would be “the biggest tax cut since Reagan.”
The only question is why has this taken so long? The new plan is not much different from the one that Trump campaigned on — and that economist Larry Kudlow and I helped draft for then-candidate Trump. This tax cut should already be the law of the land.
Employers, investors and workers are counting on Republicans delivering this economic stimulant before the end of the year.
The lower rates on businesses — 20% for corporations and 25% for most small businesses — would almost certainly incentivize more hiring, higher wages and more capital investment. Chopping our corporate tax rate nearly in half would bring capital, jobs and businesses back home to all of the states. What better way to shake the rust off the Rust Belt?
I only wish that the GOP had stuck with the 15% corporate rate Trump has endorsed since the start of his campaign. At 20%, many nations will still be lower than we are.
The critics say that business tax cuts won’t work, but then why has every nation in the world — except the United States — cut their corporate rate over the last 25 years? The rest of our competitors are at 25%, and we are at 40%. This is a 15% head start program for China, India, Germany, Mexico and many of the nations with which we compete.
How stupid is that?
The Irish, I learned from talking to folks at Ireland’s public radio, are praying that America doesn’t cut its business tax. Ireland has a 12.5% corporate tax, one-third the rate of the United States, and American companies have sent tens of thousands of jobs to Dublin. With the Trump plan, many will migrate back.
There are 27 million small businesses that will benefit from the cut. This isn’t intended to enrich the owners but to recapitalize these businesses so they can expand and bring on more workers. It’s simple: You can’t have jobs without employers — and the more profitable the business, the more people it can employ.
And just to set the record straight, every time taxes have been cut in modern times, the economy has accelerated. That was true in the 1960s under John F. Kennedy and again in the 1980s under Ronald Reagan.
Although it’s true that Bill Clinton raised income tax rates and still saw a booming economy, in 1997 he signed one of the biggest capital gains tax cuts ever, and that caused a flood of additional capital gains revenues and helped balance the budget. Even the 2003 Bush capital gains and dividend tax cuts had positive effects on revenues and growth from 2003 to 2007.
The best evidence of the positive effects of tax cuts come from the states. On average, the nine states with no income taxes have performed significantly better than the nine states with the highest income taxes, as noted in a report I co-authored for the American Legislative Exchange Council.
North Carolina, Tennessee, Michigan and Florida have all cut taxes in recent years, and their economies are going gangbusters. Meanwhile, the two states with the worst financial performance, Illinois and Connecticut, have raised taxes over and over. The taxpayers are stampeding out of those states.
I’ve predicted from the start that if Trump gets his tax cut passed, we will see 3% to 4% growth for four years. That will not only create several million new jobs, but it will also generate nearly $2 trillion of added revenues for the feds, the states and cities. Show me any tax increase that could generate that kind of tax revenue?