tax reform by trump

For much more than 30 years, the United States has been regulated by the same tax code. Donald Trump, the incumbent president, vowed during his elections that he intended to review the existing tax regime and implement a different one that will better suit the needs of the people of America and the corporate community as a whole (Hunt, Albert R.). A few months after assuming power, the president continues to want to make good on the promises he made to the public. The primary principle of Trump's tax overhaul is "Americans First," and the tax cuts he announced are groundbreaking. He advocated a radical overhaul and reduction of the new tax scheme. His tax cuts are aimed at all Americans and US companies, which stimulate the enthusiasm of American workers and keep American companies stay in the United States. Trump claimed that his plan could promote economic growth without increasing the deficit.

Ronald Reagan introduced the tax reform in 1986 that was supported by both two parties (Bradley, Bill).His tax reform improved simplicity, fairness and economic efficiency by expanding the tax base and lowering tax rates. Similarly, today's tax reform also has the potential to help American families and the economy. Properly designed tax reforms may help mitigate the sharp increase in inequality over the past 20 to 30 years, and it can repair corporate tax systems that are dysfunctional due to globalization, reduce uncertainty, and promote growth. Regrettably, according to our understanding of the intentions of the president and congressional leaders, they are likely to pursue the tax reform that has been the worst in US history. Trump's tax reform is only beneficial to the 1% of the population with the highest income, but it can lead to an explosive increase in federal debt and has little effect on stimulating economic growth. In 1986, both Democrats and Republicans agreed that the tax reform should not lower the tax burden on high-income taxpayers (Bradley, Bill). In order to solve this problem, Reagan, while lowering taxes, raised capital gains taxes and reduced investment incentives, which strengthened corporate tax collection.

However, unfortunately, both the Trump’s plan and the House Speaker Paul Ryan's plan broke that principle, and they made the tax burden for the rich people much less. They claimed that there will be no absolute tax cut for the upper class because any reductions in upper-income taxes will be offset by fewer deductions. The problem is that even if the tax deduction for the people who earn more than $ 1 million is completely eliminated, it will not be able to offset their benefit from the drastic reductions in corporate income tax and personal income tax.

With as much as Trump has drafted a proposed tax reform, it will not have any force of law. This is because the president has no power to bring a bill to the senate since the law making power only vests in the members of the congress. Article 1 of the Constitution exclusively vests power in the Congress but the president assents to a bill that has been passed by the congress in order for it become law (The White House). Trump is likely to encounter a few challenges in the implementation of the tax reform that he has proposed. This is due to the fact that with as much as the senate has a majority of 54 senators it is still 6 short of the 60 votes that are required in order to ensure that the reform goes through (Jagoda, Naomi). Consequently, in order to overcome this deadlock, Republicans will require the assistance of the Democrats in the Senate to either effect the reform through budget reconciliation or at least a few of them to support the tax reform bill (Jagoda, Naomi).

One other element of the Trump plan is worth noting: It would eliminate the federal estate tax and the gift tax entirely. Although Reagan had made a great change in his tax reform plan, he didn't make any changes to inheritance and gift taxes, because the abolition of inheritance tax and gift tax may give the rich people more opportunities to avoid tax. The rich people can pass their assets to their children, and grandchildren use the form of gifts to ensure that their wealth will not be taxed. Some people may even make a profit from commercial activities in the form of gift giving without paying any taxes. It makes Trump's tax reform policy more conducive to the rich, they will get more benefits from the tax reform policy. In the long term, the gap between rich and poor will be further widened, which also very easily lead to dissatisfaction with the middle class. Economically, tax cuts mean more deficits.

When Trump first proposed tax cuts, he stressed that tax cuts will promote economic growth. The most basic function of taxation is to raise state revenues. Such a tax cut should not be applied if the tax cuts affect the revenue required for the proper functioning of the government. Trump’s tax reform plan not only make the rich people whose income grow fastest in the past few decades to enjoy the high tax relief but also means that the federal budget will be severely affected. Trump would like to follow Reagan's tax cuts. It is worth remembering that here we already have a lesson. President Reagan's tax cuts did not follow the original direction, and in the end, the deficit widened sharply and the government's debt was higher and higher. In the end, out of concern about federal debt, Reagan found it necessary to raise taxes. This situation of the huge financial deficit result from the tax cuts was not relieved until Clinton became the president. Therefore, whether Trump's tax cuts can promote the effective growth of the economy have to be questionable.

It does not seem easy to understand his tax claims simply from a political standpoint. His party affiliation has undergone many changes, either Republicans, or Democrats, or Reformed parties, or to maintain the so-called independence. However, if from his businessman's point of view, things will be easy to understand. First, from a substantial tax reduction point of view, the goal of the businessman is to get as much revenue as possible and less tax is conducive to the realization of this goal.

Second, from the point of view that the biggest beneficiaries from tax cuts are 1% of the population who the highest-income earners, Trump paid $ 362 million in income tax in 2014. In any case, Trump is undoubtedly wealthy people. The data also shows that Trump is not suitable as a representative of low-income persons. He has never experienced the lives of low-income people, and his social relation circle is basically around the rich people. It is no doubt that Trump knows nothing about the lives of low-income people and their actual needs, so he will be relatively easy to ignore the benefits of low-income groups, and it is difficult for him to effectively consider their needs.

Third, from the perspective of the abolition of estate duty and gift tax, as a businessman, Trump use a variety of tax avoidance techniques beyond reproach. The nature of businessmen's profit-making determines that any possible of tax avoidance measures will be applied. In Trump's view, the estate tax is completely duplicate tax that should be abolished. From the financial principle of taxation, the abolition of the estate tax will not bring too many problems. The estate tax will not bring too much tax revenue. In reality, the most important goal of estate tax should be to encourage the rich people to make more donations, rather than raise more tax revenue. As the changes in the concept of wealth, the goal of wealth dispersion is not necessarily to achieve through tax policy.

Although in the current view, Trump's tax reform has a lot of loopholes, as a businessman, Trump is most concerned about the impact of tax cuts on job incentives and the decline in capital costs. If everything goes according to his wishes, then it may lead to long-term economic growth, the United States may become more powerful. However, President Reagan's tax cuts did not achieve the desired results but increased the fiscal deficit. Therefore, we have to be careful about Trump's tax cuts.

Works Cited

Bradley, Bill. "Opinion | When Congress Made Taxes Fairer". Nytimes.Com, 2017,

https://www.nytimes.com/2017/04/29/opinion/sunday/when-congress-made-taxes-fairer.html?_r=0.

Hunt, Albert R. "Why It's Been 31 Years Since The Overhaul Of The U.S. Tax System".

Denverpost.Com, 2017, http://www.denverpost.com/2017/02/21/why-its-been-31-years-since-the-overhaul-of-the-u-s-tax-system/.

Jagoda, Naomi. "Five Challenges For Tax Reform". The hill, 2016,

http://thehill.com/policy/finance/domestic-taxes/306849-five-challenges-for-tax-reform.

The White House. "The Legislative Branch". Whitehouse.Gov, 2017,

https://www.whitehouse.gov/1600/legislative-branch.