President-elect Donald Trump’s new administration, as well as the Republican-controlled Congress, has promised income tax reform in their first 90 days in office. Their similar plans promise tax cuts for people of all income levels including the very wealthy. The top 1 percent would get about half of the benefits of Trump’s plan with millionaires getting an average tax cut of $317,000. Most of us in the middle class would be reaping somewhere around $5,000 or less in our income tax savings.
Before making plans to spend the extra cash, consider the consequences of Trump’s proposal. The beneficial trickle down effect of an assumed expanding economy and increase in jobs would not address the worst economic problem of all — massive federal budget deficits. The National Bureau of Economic Research has found that only 17 percent of the revenue lost from these cuts is regained. Initially, you would probably see the economy expand, but the massive increase in the federal deficit would be disastrous in the long run.
When Ronald Reagan dropped the top tax rate in the 1980s from 70 percent to 28 percent, he added $1.86 trillion to the cumulative deficit (a 186 percent increase). The two Bushes (54 percent and 101 percent increases) and Barack Obama (68 percent increase) have piled on the debt. Our economy has survived the last eight years due to an unrestrictive monetary policy (Federal Funds near zero) — not from any Obama fiscal policy.
My advice to Trump: Stop tweeting, get a lot more sleep, and do more reading and research.
Thomas Fohne, Columbia