Trump has pledged to lower the corporate tax rate to 15%, “taking our rate from one of the worst to one of the best.” He has also said he would institute a one-time deemed repatriation of corporate cash hoards held overseas at a significantly discounted 10% rate and put an end to deferral on taxes on corporate income earned abroad.
Here is where the Trump tax plan moves into the realm of truly unique (genius perhaps?) and pro-American jobs. He is proposing a one-time tax on overseas profits that would be applied to an amount that now exceeds two TRILLION dollars. Companies would have a 10% tax applied to those profits, but several years in which to pay it. The end result would be much of that money would then return back into the United States instead of remaining offshore free from U.S. tax law. And when that money returns, so too will a far greater corporate investment into the American economy which will no doubt create JOBS-JOBS-JOBS, particularly when you combine the above scenario with Mr. Trump’s proposed 15% corporate tax limit. It would be a historic one-two economic punch not seen in generations and would allow the United States to re-emerge as a place that actually makes things and provides near-limitless prosperity potential for those who call this country home.
Not only would American companies be returning in droves to do business once again inside of the United States, but foreign corporations would be doing the same. We could realistically see a U.S. economy growing annually at rates of five or even six percent – millions of new jobs, millions of people moved off of government subsidies and living proud, self-sufficient lives that contribute to the betterment of society.
The billionaire businessman has also targeted corporate inversion, the practice of U.S. companies reincorporating overseas in order to reduce the tax burden on income. In November, he characterized Pfizer’s planned merger with Allergan in order to relocate its headquarters to Ireland as understandable. “There is no way you can stop it really other than lowering the taxes because right now … it is prohibitive to bring that money in,”he said.
At Thursday’s Republican debate on Fox Business Network, he reiterated his stance on the corporate inversion conundrum, calling it “one of the biggest problems our country has.”
“Right now, corporations, by the thousands, are thinking of leaving our country with the jobs — leave them behind,” he said. “They’re leaving because of taxes, but they are also leaving because they can’t get their money back and everybody agrees, Democrats and Republicans, that it should come back in. But they can’t get along. They can’t even make a deal.”
He also cited his friend and activist investor Carl Icahn, who has formed his own super PAC dedicated to corporate tax reform, on more than one occasion. (He mentioned him in the context of trade, not taxes.)
Trump’s tax plan, unveiled in September, would certainly make life easier for corporations. In fact, it might help a lot of people.
“His tax plan is one of the most dynamic and pro-growth tax plans out there,” said Merrill Matthews, resident scholar at the Institute for Policy Innovation, a Texas-based, right-leaning think tank, in an October interview. “You would find a huge amount of new business investment and companies willing to put their money out there to begin growing the economy.”
Virtually everyone would see their tax bills go down under a Trump administration. The highest earners, as with most Republican plans, would reap the biggest benefits, with the top 0.1% getting back 19% in after-tax income while middle-income households would get back 4.9%. Some could recast themselves as a business (like freelancers and the self-employed) to shift from the personal income tax scale’s 25% cap to the 15% business scale, saving themselves some money, too.
But there’s a catch: Trump’s tax plan would reduce government revenue enormously, and the federal budget deficit would almost inevitably skyrocket.
Nonpartisan tax research group the Tax Foundation calculates that Trump’s plan would cut taxes by $11.98 trillion over the course of a decade. It would lead to 11% growth in the GDP, 6.5% higher wages and 29% larger capital stock as well as 5.3 million jobs. However, it would also reduce tax revenues by $10.14 trillion, even when accounting for economic growth from increases in the supply of labor and capital.
“It reduces federal revenue by maybe a quarter. You can construct the United States at 75% revenue, but you have to have a plan for how you’d get there,” said Alan Cole, an economist with the Center for Federal Tax Policy at the Tax Foundation. “If there weren’t any spending cuts that materialized, you would see the deficit widen substantially the moment the plan was enacted.”
“That tax cut would produce faster economic growth and a bigger economy — as long as you pay zero attention to the fact that it would dramatically increase the deficit and budget debt,” said Jim Pethokoukis, a columnist and blogger at the American Enterprise Institute, a center-right think tank based on Washington, D.C.
And therein lies the foundation of the Trump plan – an emphasis on the individual at the expense of Big Government, again a very Reaganesque concept and a direct contradiction to the Obama mentality that believes Big Government is both worthy and wise and thus should be fed with an ever increasing amount of your tax dollars in order to sustain its power over you.
Lower taxes. More jobs here in America. Greater freedom.