Trump's Economy: Lower Taxes, No TPP, and … Affordable Childcare?
The Republican nominee’s latest round of proposals included some surprises, as well as plenty of less-surprising GOP orthodoxy.
On Monday, Donald Trump took to the stage of the Detroit Economic Club to release his latest plan for jumpstarting the economy, a task that he said “won’t even be that hard.”
Among his major proposals is to streamline income tax brackets—of which there are currently seven—to three tiers, in which no American would pay more than 33 percent to the federal government. He promised to cap the corporate tax rate at 15 percent and to put an end to estate taxes. He also suggested halting any new federal regulation on finance, doing away with TPP, and bringing back the Keystone pipeline project. He promises to override what he deems overreaching executive orders and to repeal Obamacare, saying that doing so will create 2 million more jobs.
Many of the tenets of Trump’s economic strategy are predictable for a Republican candidate: tax cuts (particularly for businesses) and changing the way the U.S. trades with other countries in order to bring about what he calls an “America first” economy. But there are other portions of his strategy that might feel new to those with traditionally conservative sensibilities. For instance, Trump’s plan advocates for more affordable child care by allowing Americans to deduct the cost of it from their taxes.
This updated economic outline shows some acknowledgement of earlier criticisms. For instance, individual tax rates have been raised from the original plan that specified brackets of 10 percent, 20 percent, and 25 percent, which many feared were way too low to continue providing enough revenue. But overall, many of Trump’s plans amount to tax relief for high earners and business owners.
The new tax rates, while higher, would still provide a nice cut for those in the highest tax bracket, who currently pay 39.6 percent of their income to the government. Trump railed against the “death tax”—also known as the estate tax—as unfair and un-American, saying that it siphons more money from hard-working Americans who have paid taxes for their entire lives. In reality, only a tiny number of very wealthy American families are subject to this tax—about two of every 1,000 estates, a Center on Policy and Budget Priorities report finds. And these estates wind up paying less than one-sixth of their overall value in taxes.
Trump’s economic plan promises to get rid of loopholes for the carried-interest deduction—which allows those who manage investment funds to receive preferential tax treatment on their earnings—an idea that has actually been taken up as something of a liberal cause. But he also proposes chopping the corporate tax rate by more than 50 percent, down to a 15 percent flat rate, from the highest rate of 35 percent. Trump says that small businesses will benefit the most, but few businesses have actually paid a rate as high as 35 percent in recent years, according to a report from the Government Accountability Office. And those that have been taxed at that rate have often had their effective rate reduced thanks to credits or deductions, or been relatively wealthy, with over $10 million in assets.
Helping Trump form this economic plan is his recently announced economic advisory team. The 13-member group is composed entirely of men, and despite Trump’s billing of the team as a group of economic experts, only one of them actually has a doctorate degree in economics. Instead, the group consists of business leaders: billionaires, bankers, and a poker player, to name a few. Many in the group also happen to be Trump’s largest donors. (Trump has said that his daughter, Ivanka, has helped him with his plan, though she isn’t listed as an official economic advisor.)
The move away from heavyweight academic economists seems to be intentional. In his speech, Trump mocked the “so-called” economic experts employed by the Democratic party, saying that they have consistently failed to successfully boost the economy in the aftermath of the recession.
Trump spent a fairly large portion of his nearly hour-long speech trashing the economic legacy of Presidents Obama and Clinton, and criticizing Hillary Clinton’s economic platform, which he said would tilt the balance of power toward foreign countries and strip jobs from American workers. But Monday’s speech offered a bevy of tax cuts without very specific plans for how to make up the lost revenue, aside from repealing Obamacare. He claimed, for instance, that “Our lower business tax will also end job-killing corporate inversions, and cause trillions in new dollars and wealth to come pouring into our country.”
Analysis of Trump’s past economic proposals have called into question whether or not his widespread tax cuts and plans for reinvigorating the slumping economy would do more harm than good, including widening the already large deficit. “This mix of much lower tax revenues and few cuts in spending can only be financed by substantially more government borrowing,” a June analysis from Moody’s found, “The economy will be significantly weaker if Mr. Trump’s economic proposals are adopted.” His latest plan contained no specific indications that it would fare much better.