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Trying to advocate his tax-reform pro­posal, Pres­ident Trump insisted: “It’s not good for me. Believe me.”

He shouldn’t have said that.

His statement offered an easy target for the plan’s oppo­nents, who promptly howled that his nine-page framework is a handout to the rich. “Trump’s tax plan ben­efits wealthy, including Trump,” cried a New York Times headline.

The pres­ident missed the point. His plan is good for him. But it’s good for the rest of America, too.

Trump’s framework will improve life for everyone: It offers direct ben­efits to the middle-class, encourages eco­nomic activity, and reduces the time cit­izens will spend paying taxes. It looks for long-run solu­tions and rec­og­nizes that the economy is a dynamic market in which tax cuts have ripple effects.

Perhaps the most sig­nif­icant and con­tro­versial aspect of Trump’s plan is its recog­nition that boons for business help people of all income levels. The plan caps the small-business income tax at 25 percent, allows busi­nesses to write off capital invest­ments as expenses, and cuts the cor­porate tax rate to 20 percent from 35 percent (the highest in the developed world).

Cutting business taxes helps ordinary people.

Busi­nesses aren’t faceless abstrac­tions: they’re owned by people, who hire people, who produce goods and ser­vices that help people of all classes. When busi­nesses face taxes, they pass on the costs. More than 75 percent of cor­porate taxes fall on workers in the form of lower wages, according to the Her­itage Foun­dation.

Cutting the cor­porate tax rate creates the right incen­tives: It encourages busi­nesses to come to America (or stay here) and it reduces incen­tives for tax evasion. In the long run, the ben­efits of these policies reach middle- and lower-classes through higher wages, increased employment, and better products.

An analysis by the Tax Foun­dation found that the stand-alone effect of cutting the cor­porate rate to 20 percent could lead to 3.4 percent growth in GDP, $3 trillion in addi­tional capital, and a 2.9 percent rise in wages over ten years.

Trump’s framework offers more direct ben­efits to the middle class, too. It doubles the standard deduction and promises to increase the child tax credit. It vows that con­gres­sional com­mittees will work on “addi­tional mea­sures” to relieve the middle-class tax burden, and it claims to create incen­tives for work, higher edu­cation, and retirement security.

Elim­i­nating the death tax on property and low­ering income taxes across the board means the Trump plan will benefit the wealthy as well (although elim­i­nation of the death tax will help others, such as farmers, too). A Tax Policy Center report released Friday pre­dicted that the wealthiest 1 percent would face the biggest tax reduction of 5.7 percent, while everyone else would get no more than a 1.4 percent. Plus, it claimed, the top 1 percent of income earners would pay an even lower per­centage of all income tax than it does now.

But these are no grounds for crit­icism.

“It is impos­sible to cut income taxes and not reduce taxes on the upper half of the income dis­tri­b­ution,” said Hillsdale College Pro­fessor of Eco­nomics Gary Wolfram, noting that the top 50 percent of income earners pay 98 percent of all income taxes.

More important, light­ening the tax burden on the wealthy is only a problem for those with a zero-sum men­tality who believe taxes are a way to divvy up a pie. That’s not an accurate view of the economy. Lower taxes for the wealthy doesn’t hurt the middle class. To the con­trary, it pro­motes upward mobility and stim­u­lates growth as the wealthy invest and spend their income.

By reducing taxes on the wealthy, Trump’s tax plan can spark inno­vation that will raise stan­dards of living for the poor, Wolfram said: “Our concern should not be how rich are the rich, but how rich are the poor.”

And by sim­pli­fying the tax code, slashing its seven brackets to three (with room for a fourth) and cutting out itemized deduc­tions, Trump’s plan will give people time back — a mon­etary gain in itself for a nation esti­mated to spend bil­lions of hours filing taxes. The plan also takes out state and local deduc­tions, which encourage states to increase taxes and redis­tribute wealth from low- to high-tax states, Wolfram pointed out.

As Con­gress fine-tunes the plan, it’ll be time to cri­tique spe­cific policies and impli­ca­tions — like an increased budget deficit of $2 trillion over 10 years, as some estimate. But as a framework, Trump’s pro­posal is a good one, incen­tivizing work and eco­nomic activity and reducing undue burdens on American cit­izens.

“This isn’t about me,” Trump should have said. “This plan will benefit me because it ben­efits everyone in America.”

Then, we’d believe him.

 

Nicole Ault is a junior studying eco­nomics.

  • pret­ty­inpink

    Good job. I see a bright future for you.

  • Tommy Moore

    Maybe need a little econ history, this has been tried before (at least twice) and been an abject failure both times.

    Tax REFORM is not syn­onymous with Tax CUT regardless of the pen­chant of politi­cians to equate the two.

    Well written article, but ignores history and makes a TON of assump­tions based on a ‘framework’ that doesn’t offer details and hasn’t been properly scored yet.

    I am curious as to thoughts on the initial scoring that shows this would harm the majority of middle class house­holds by 2027 while con­tinuing to benefit the majority of the wealthy, short term gains that are fol­lowed by long term losses is not a recipe for eco­nomic success.