Monday, September 28, 2015

Trump's Incredible Tax Proposal: Now This is What A Tax Cut Looks Like

I have often written that a key to tax cuts is not to reform the system, but to simply cut taxes from the current base, early indications are that this is just what Donald Trump has done in his new tax plan.

Josh Barro, at NYT, is up in arms about the proposal but provides a good early glimpse about what it is about (my emphasis)
You could call Mr. Trump’s plan a higher-energy version of the tax plan Jeb Bush announced earlier this month: similar in structure, but with lower rates and wider tax brackets, meaning individual taxpayers would pay even less than under Mr. Bush, and the government would lose even more tax revenue.

Currently, the top income tax rate for regular income is 39.6 percent. Mr. Trump would cut that rate to 25 percent, the lowest level since 1931. He’d cut maximum rates on capital gains and dividends to 20 percent from 23.8 percent. He’d cut the corporate tax rate to 15 percent, and also offer a special tax rate of 15 percent to business owners — less than half what they may pay under today’s rules. He’d abolish the estate tax entirely. 
Mr. Trump says he’d pay for those tax rate reductions by “reducing or eliminating most deductions and loopholes available to the very rich.” But in truth, rich people already pay tax on most of their income, so there’s less revenue available from cutting rich people’s tax breaks than Mr. Trump and many voters believe...
Even the hedge fund managers Mr. Trump has railed against on the stump would get a tax cut under his plan. The usual fee structure for a hedge fund is called “2-and-20”: a flat management fee (often 2 percent) on all assets, plus a performance fee (often 20 percent) on profits above a set threshold. Currently, the management fee is taxed at ordinary rates up to 39.6 percent, while the performance fee enjoys a preferential rate of 23.8 percent. Under Mr. Trump’s plan, all this income would be taxed at a maximum of 25 percent. The performance fee would be subject to a small tax increase, but that effect would be dwarfed by the large tax cut on ordinary management fees.
Another large, though less-noticed, tax cut in Mr. Trump’s plan is a reduction in the maximum tax rate on “pass-through income” to 15 percent; currently, this income is taxed at the same rates as wage income, up to 39.6 percent...
In addition to offering huge tax cuts to the rich and to business owners (including me!), Mr. Trump would offer huge tax cuts for the middle and upper-middle class. Married couples would pay no tax on their first $50,000 of income and just 10 percent on the next $50,000. A married couple with no children earning $100,000 and taking the standard deduction would pay $11,437 in income tax under today’s rules; under Mr. Trump’s plan, they would pay just $5,000, a tax cut of 56 percent. Many people with low-to-moderate incomes would see their income tax bills reduced to zero, increasing the share of the population that pays no income tax at all...
He’d also offer huge tax breaks to corporations, which would pay 15 percent, down from a current rate of 35 percent.


  1. Charlatans talk tax cuts. Serious people would talk spending cuts.

  2. For all the Deconstruction of Milton Friedman, I believe - subject to a video or something from a book I'm not aware of - that he consistently stated that it is what government SPENDS that matters. He was in favor of any and all tax cuts, at any time and for any reason as he thought it might put a brake on the rapacious aspects of the Central Government.

    We have had a tax cut of about 33% of the cost of government over the last few decades and the current administration [sic] is shooting for something higher than that.

    I am happy to read that Trump is on the tax cut bandwagon but, like Boehner demonstrated, I don't want some ONE person hoping for the BIG DEAL and a favorable rating in some History Book.

    Cut taxes. Great. CUT SPENDING!!! Better yet.


  3. May be one of the best things we have seen so far in the campaign, and that's not saying much; boy I sure do miss Ron. Now Trump needs to come out with some real spending cuts.

  4. Is this enough to gain your support? I can't ever support him because of the War Mongering tone, and Mussolini type speeches, but this is tempting...

  5. There wont' be any tax cuts. The GOP has zero chance of taking the White House.

  6. This looks like a recipe for huge increases in government debt since he hasn't proposed any spending cuts.

  7. "and the government would lose even more tax revenue". This phrasing seems to indicate the mindset of people who believe the money people earn belongs to the government and through the government's generosity the people are graciously allowed to keep some of it.

    FIXED: "and the government would steal even less taxes from people"

  8. Wow, almost has me saying "Trump for president".
    IF it does look like he will win, can we get the Judge Napolitano to try and meet the guy? Surely Trump knows the Judge, from Fox, maybe he would let him bend his ear on Libertarianism.
    Maybe enough to get the Judge put on the SC? hahaha I'm having day dreams now.

  9. Tax cuts don't mean anything without real spending cuts. If Trump cuts taxes and it's business as usual on the spending front, they'll just have Yellen monetize the difference and we'll experience the theft through the inflation tax. From everything I've read thus far, Trump's plan appears to be the usual empty GOP rhetoric of "lower the rates, eliminate the tax deductions / loopholes, help the middle class (is there one left?) blah blah blah"

  10. the rich already pay tax on most of their income

    All depends on what you call "rich" and what you call "income". The "merely rich" who have regular income are taxed through the nose. The "extremely rich" typically have very little taxable "income" and pay a far lower percentage of their yearly inflow in taxes than the "merely rich".