The Trump Tax Plan
I know he hasn’t announced a plan yet, because they are all trying to complicate it — this is just what they SHOULD do.
The job of picking how deep to cut the corporate income tax, without risking a further Federal Revenue shortfall – and/or not cutting it deep enough to stimulate growth — is a delicate balancing act. It requires telling the future and these pols aren’t that smart.
Which means they will have a wildly varying set of scenarios from which to make predictions about what will or will not happen. I don’t see a clean resolution to the clashing projection war about to erupt, and this is a GOOD thing, because the many impasses will probably force a stepped plan like I am advocating, and that will end better for the country than any other alternative.
The biggest mistake Reagan made when he cut taxes, (although his tax cuts were also necessary), was the way they were implemented.
The lack of a phase-in period caused the Savings & Loan crisis, something that could have been avoided, something we will need to avoid this time around as well. To avoid the same type of problems — which always spring forth from the realm of unintended consequences and spoil the plan — the secret is to stage the cuts and stage the BAT. Simple.
So, beginning in 2018, the top corporate rate would fall to 25%, and the majority of loopholes, shelters and tax deductions, corporations can claim, would be drastically reduced and/or eliminated.
This 25% rate is more than the Treasury ACTUALLY collects at the moment, (loopholes reduce the total collected dramatically) is widely accepted in the Republican AND Democratic Parties as an acceptable cut.
This first cut will help small and medium size businesses the most, because fewer of them get to use the deductions, loopholes, and shelters — big corporations specialize in — for tax evasion purposes.
In this first year, foreign cash stores held by American corporations, can be returned and will be taxed at 12.5%.
The Border Adjustment tax will not be in effect, but it will announced, that starting in 2020, any VAT taxes, import duties, tariffs, restrictions and/or barriers erected against American exports — from any and all countries, will be “Counter Balanced” by a Border Adjustment “duty” on exports from those VAT tax countries, in an amount calculated to be equal — but not greater — than the percentage sum American goods must pay in VAT and border taxes — to enter those target countries.
This gives Mexico and others time to adjust to the way we plan to do business, but is not unfair to anyone, in fact, it leaves the ball in their court.
Mexico could preserve their NAFTA relationship completely with the U.S. under this plan, they would even have a year or two to lower their VAT tax. This is not bullying, Mexico promised they wouldn’t impose a high VAT — when they signed the agreement in the first place – this is just restoring the intended balance.
In 2019, the top rate would fall to 20% and the remaining deductions would be closed off. With the BAT announced and now starting, depending upon what our trading partners and the domestic economy do, the Revenue picture upon which the next cut could be planned — would be much clearer.
Foreign cash stores can be returned for the last time in this year and will be taxed at 15%.
A generous round of business expense allowances and shortened write off time tables adjustments to give the business community a shot in the arm — would be done immediately, even retroactively for this year. This can be easily modified later when we’re roaring again, and is a good way to get things moving right away without creating filibusters.
This plan would spark growth, is passable, and is consistent with the Presidents campaign promises.
Which is Exactly why it won’t happen, I’ve lived here in Washington D.C. all my life and I’ve never seen them do the easy, right thing.