Donald Trump will win in November because his hopeful,optimistic plan for the economy starkly contrasts with Hillary Clinton’s tax,punish, and spend blueprint.
Here, I will outline the major hallmarks of the two candidate’s plans and sprinkle in my own commentary.
Donald Trump is proposing broad, across-the-board tax relief for all Americans and a simplified tax code. He is also looking to eliminate the estate tax. These tax cuts will put more money in the pockets of every day Americans and jump start the economy.
Critics of Trump’s plan say that tax cuts will reduce government revenue and expand our budget deficit(thereby increasing our government debt). However, this logic fails to factor in the possibility of increased revenue due to increased economic growth(getting a smaller percentage of a larger pie might increase the size of your slice). For example, the Tax Reduction Act of 1964(signed by Lyndon B Johnson in 1964) which dramatically reduced income and corporate tax rates did not lead to a spike in the deficit. In fact, the chart below clearly shows that the federal deficit decreased immediately following the tax cut.
In addition to decreasing the government budget deficit the unemployment rate fell from 5.2% in 1964 to 4.5% in 1965, and fell to 3.8% in 1966.
Many left-wing Economists and pundits act as if it is a given that lower taxes will reduce government revenues when historical precedent clearly suggests that the relationship is more complex than they are willing to consider.
In contrast to Trump, Hillary clinton is proposing few changes to the current income tax code except for raising taxes on the richest Americans. The struggling middle class will not see their tax bill shrink under Hillary. Hillary fails to understand that hard-working middle class Americans are living day to day and a reduction in their tax bill could make a huge difference to their quality of life and the economy. What would middle class Americans do with more money in their pockets? They might buy a car, renovate their homes, or spend more on their loved ones during the Holiday seasons.
Trump intends to follow the model laid out by Ireland and Hong Kong by reducing the US Corporate tax rate to 15%. Right now, because our corporate tax rates are so high — US companies have a fiduciary duty to their shareholders to relocate their cash hordes overseas. Apple, for example holds 93% of its assets overseas and Tim cook, Apple CEO, has been an outspoken critic of the current paradigm. Cook, typically reserved, showed some fire on 60 Minutes in 2015 when he opined that “This is a tax code, Charlie, that was made for the industrial age, not the digital age,” Cook said. “It’s backwards, it’s awful for America, it should have been fixed years ago, it’s past time to get it done.”
Trump has proposed a special one time 10% repatriation tax that will allow Americas multinationals to bring their money home to invest and create jobs in America. Trump understands that rather than complaining and attempting to punish businesses, you must create policies to incentivize companies to invest in America — they will not do it out of blind patriotism.
Hillary, on the other hand, is proposing an exit tax on companies leaving the country and an inversion crack-down which, she believes, will force companies to keep their assets in America. However, these measures will reduce the competitiveness of our multinationals and set a precedent of using taxes to punish businesses. In addition, this plan will be quite difficult to enforce and require the diversion of the federal government’s resources towards tax policing(the IRS is already underfunded). Her anti-business stance here is most likely motivated by her desire to create common ground with the far left.
Hillary Clinton and Donald Trump have very different visions on the path forward for the economy. Hillary’s plan scapegoats the rich and corporations and will lead to a reduction in hiring and investment.Crucially, Hillary’s plan does nothing to help the shrinking US middle class. In contrast, Trump’s tax plan will benefit the middle class through reduced taxes and the jobs that are created by corporations who choose to take advantage of America’s newly competitive corporate tax rate.With a 15% corporate tax rate- companies will finally have the incentive to open up new factories in America. Hillary(and Democrat candidates, in general)has no incentive to create middle class jobs as middle class voters vote Republican in far greater numbers than the impoverished. The Democratic strategy relies on building a coalition between those too poor to pay taxes and those so rich they do not care what their tax rate is — this strategy will backfire in November.