While Donald Trump claims to be for the working man, his tax proposal is just another Republican tax cut for the rich and big business. The biggest single tax break would be for corporations, whose tax rate would be cut from 35% to 15%. This and other tax cuts for corporations and other businesses would cut federal tax revenue by about $4.5 trillion dollars over the next ten years, or about $450 billion dollars a year. This would mainly benefit the top 1%, who own about half of corporate and business wealth and other high-income individuals who could change their tax status to be a business.
Trump’s tax plan would also cut personal income taxes for the well-to-do and rich. By cutting the top tax rate from 39.6% to 33%, eliminating estate and gift taxes, and ending the Alternative Minimum Tax or AMT, it would mean that almost half (47.3%) of the individual tax cut dollars would go to the top one percent of tax payers, and almost a quarter (24.2%) would go to the top one-tenth of one percent of taxpayers. While the top one-tenth of one percent of tax payers would each get more than a million-dollar tax cut per year, the poorest fifth of taxpayers would only save $110 each!
Even worse, almost 8 million families that have single parents or a large number of children would actually pay more under Trump’s tax proposal. This is because the Trump plan would eliminate the head of household category used by many single parents, and also eliminate the tax deduction for dependent children. These families could face tax increases in the thousands of dollars, despite Trump’s claim that he would protect the middle class and working class.
The Trump tax plan would cut federal government tax revenues by more than $6 trillion over the next decade and cause an even larger growth in the federal debt because of interest costs. The Trump campaign claims that his tax cuts would stimulate economic growth and lead to more tax revenue to make up for the cuts. Most tax experts disagree with this idea.
In addition, the experience of the tax cut under former President Ronald Reagan is important. The 1981 Reagan tax cuts slashed business taxes, cut the top tax rate from 70% to 50%, cut the estate taxes, which benefited businesses and the rich. Reagan and his supporters claimed that this would stimulate economic growth, but in fact the annual rate of growth of Gross Domestic Product or GDP (a measure of value of goods and services made in the U.S.) fell from 3.4% in the 1970s to 3.1% in the 1980s. Slower economic growth and less tax revenue meant the federal debt almost tripled from $900 billion when Reagan took office to $2.6 trillion when he left.
Many economists would argue that with interest rates so low, it would be good for the federal government to borrow and spend more on roads, bridges and education. This could both create more jobs now, and be an investment for the future. But to borrow more, so that corporations that are sitting on trillions of dollars of profits and the rich who have their biggest share of income since 1929 can have even more, would be of little benefit to the economy, but it would be a gift to the billionaire class to which Trump belongs.