WILL DONALD TRUMP’S TAX CUTS REALLY BOOST THE ECONOMY?

Cutting taxes can stimulate the economy; but, it must be done in the right way! Middle income families, say $75,000 to $125,000 in annual income, tend to be “Consumers”.  They would probably spend the additional tax savings, by patronizing small, local businesses.  Higher income families, on the other hand, say upwards of $400,000 in income, tend to just “accumulate” additional money in investment accounts, since they already have enough to meet both essential and discretionary needs.

Small businesses are more labor intensive and, when business increases, they respond by hiring more workers.  Large corporations, however, have more flexibility in absorbing revenue increases by:  upgrading systems, scheduling increased hours for current staff, and through a greater use of technology.  For them, tax cuts rarely lead to job creation; that is, unless they lead to expansion into new products and markets!

The Trump Tax Plan seems intent on providing everyone something for nothing!  Throughout the campaign, Trump vowed that his tax cuts would be “Tax Neutral”, meaning that there would not be an increase in the National Debt.  Bipartisan tax groups, however, have suggested that his cuts would add somewhere between $7.5 and $8.5 trillion dollars to the National Debt, over ten years.  As always with Trump: any and all ideas are vague, and subject to change!   Just be sure to read the fine print!

Cuts in the Corporate Tax Rate, and Tax Holidays, as we have seen in the past, might just be used to:  buy shares back, thus enhancing the stock price; increase stock dividends; and increase  executives’ generally exorbitant salary and bonuses, which are based on that same share price.   Increasing employee wages, however, just never seems to come-up for consideration.

Side-stepping TrumpCo’s “Alternative Facts”, tax neutral means one of three things: a cut in existing programs; other taxes and/or fees would offset the tax cuts; or the National Debt would be increased, which has been denied.  So, where will they find the funding to re-fill this basket with “the loaves and the fishes”, over and over again?  

I have heard the term “Consumption Tax”, which Donald Trump seems to have taken from the GOP tax playbook.  A consumption tax is basically a National Sales Tax, and it would just be added to the state sales tax on most purchases.  A NST is regressive in the sense that it represents a greater portion of the middle income family’s disposable income.  There might be some exemptions from the NST.  In Florida, for instance, our State Sales Tax does exempt skyboxes and yachts, but just not toilet paper!

By taking Affordable Health Care away from some 20 million previously-uninsured Americans, part of that funding might be used to finance the tax cuts.  But again, the people at the lower-end suffer, as they must decide between going without health care again, or paying-up for it, if they have a serious illness.  So once again, taking money away from the Consumers, slows–rather than boosts–the economy!

The amounts deducted from the annual Income Tax return—Exemptions for the number of dependents and the Standard Deduction—might be frozen, or not adequately adjusted for inflation.  Aside from that, the trump Treasury staff, if one ever arrives in place, will just take a little bit from here and there to fill the gap.  Once the smoke from the Tax Cut Scam has blown over, I expect that we will see the National Debt creep up, as well.

Basically, I envision that the Trump Tax Plan will mostly be a Give-away, to the Wealthy and larger corporations—and hardly boost the economy at all!   Middle income families and small corporations should not be content with the left-overs.  Don’t be satisfied!   Call or Email your Senators and Congressman.  Tell them that, if the Trump Tax Cuts are intended to boost the economy, they should start where it will do the most good—the middle class and small businesses.  Anything else is just a Give-Away to the Upper-Income Class!

NOTE:  Welcome to my readers in Fiji.

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  1. #1 by cheekos on March 3, 2017 - 1:37 PM

    Aha, OK! Here come the Add-OnTaxes. Wilbur Ross, the newly-confirmed Secretary of Commerce, has just mentioned a VAT–Valued-Added Tax. In the sixth paragraph of this post, I had suggested that any tax-cuts for the middle-class–the Consumers–would be offset by a Consumption or National Sales Tax. They’re all a mirage–just a Trumpian Tax Mirage!

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