Features

Trump’s trumpeted tax plan is a dud

Donald Trump’s tax plans, designed to grapple with a tax code of 70,000 pages, amounted to just a one-page briefing.

Last week, we finally learned a bit more about President Donald Trump's well-trailed "massive" programme of tax cuts. Not a lot more, however. The plan designed to grapple with a tax code of 70,000 pages amounted to just a one-page briefing. This back-of-the-envelope scribble contained "rough principles around which the administration can negotiate with Congress", said the Financial Times. No wonder stocks slipped.

The main features include a cut in corporation tax from 35% to 15%, along with a one-off offer to induce US firms to move their money back from overseas. The number of individual tax brackets falls from seven to three: 10%, 25% and 35%.

Subscribe to MoneyWeek

Become a smarter, better informed investor with MoneyWeek.

All tax exemptions would be abolished except for mortgage interest and charitable donations. Trump appears to have been far too busy to add up the cost of these measures, although the government seems to think that the tax cuts will juice growth enough to produce the revenue to pay for them.

The extent to which Reagan's tax cuts in the early 1980s were self-financing is one of the eternal debates of economics, but one thing's for sure, as Jeremy Warner points out in The Daily Telegraph: in the 1980s growth soared as the economy leapt out of the doldrums.

Advertisement
Advertisement - Article continues below

Today, by contrast, it is already growing solidly and appears to be at full employment, so there is scant scope for producing the sort of growth boost whereby tax cuts could conceivably pay for themselves.

No wonder that fiscal hawks say Trump's plans imply trillions more in borrowing. "Trump built his business empire on debt, and got away with it," notes Warner. "Now he hopes to repeat the trick with an entire economy. Good luck with that."

Advertisement

Recommended

Visit/519858/how-long-can-the-good-times-roll
Economy

How long can the good times roll?

Despite all the doom and gloom that has dominated our headlines for most of 2019, Britain and most of the rest of the developing world is currently en…
19 Dec 2019
Visit/516944/why-wall-street-has-got-it-wrong-again
Economy

Why Wall Street has got the US economy wrong again

The hiring slowdown does not signal recession for the US economy. Growth is just moving down a gear, says Brian Pellegrini.
25 Oct 2019
Visit/economy/us-economy/600841/apples-coronavirus-warning-wont-be-the-last-but-will-markets-care
US Economy

Apple’s coronavirus warning won’t be the last – but will markets care?

If one of the world's biggest companies is feeling the pain from the coronavirus, then presumably others are too, says John Stepek. That can only lead…
18 Feb 2020
Visit/economy/inflation/600799/federal-reserve-inflation-money-printing
Inflation

Here’s why the Federal Reserve might print more money before 2020 is out

The Federal Reserve wants to allow US inflation to run “hot” for a while. But that’s just an excuse to keep interest rates low – and possibly print mo…
10 Feb 2020

Most Popular

Visit/investments/commodities/gold/600874/gold-is-at-its-highest-level-in-years-heres-how-to-invest
Gold

Gold is at its highest level in years – here’s how to invest

Gold's rise at a time when the dollar is unnervingly strong isn't unheard of – but it is curious. John Stepek explains what's going on, and what it me…
21 Feb 2020
Visit/investments/stocks-and-shares/600863/sirius-minerals-anglo-american-takeover
Stocks and shares

Do you own shares in Sirius Minerals? Here’s what you need to do now

Mining giant Anglo American has proposed a cash takeover of Yorkshire-based minnow Sirius Minerals. Unhappy shareholders must decide whether to accept…
20 Feb 2020
Visit/economy/600875/money-minute-24-february-house-prices-unemployment-and-corporate-results
Economy

Money Minute 24 February: house prices, unemployment and corporate results

Money Minute: previewing the week's most important economic and financial goings on, including the latest house price, and unemployment figures, and …
24 Feb 2020
Visit/investments/commodities/600729/the-rare-earth-metal-that-wont-be-a-secret-for-long
Sponsored

The rare earth metal that won't be a secret for long

SPONSORED CONTENT – You can’t keep a good thing hidden forever; now is the time to consider Pensana Rare Earths and the rare earth metals NdPr.
31 Jan 2020