September 27, 2017
Donald Trump is starting to push the US Congress to begin the arduous process of rewriting the US Tax Code. That alone is a very tall order, especially for a basic tax code that has been in place (in some form) since 1913. While it has absolutely undergone changes over the last century, the basic outline of this tax code has remained intact ever since. To just abolish it and rewrite it is not something is going to happen overnight. No matter who the president is.
What is more troubling to many politicians and Americans alike is that Trump's demand has no real plan backing it up to guarantee that it's successful. While cutting taxes for everyday working Americans sounds appealing to many people there has to be a detailed plan in place to ensure that we are still balancing the US national budget, which is already in debt $21 trillion. That number will grow even more with a massive tax cut such as Trump is proposing unless we slash spending to match it.
While the demands Trump is placing on Congress is high, the details of the plan are lacking. However, Trump has cited the basic "guidelines" of what the new tax code should look like. The four (4) things that Trump states that the new tax code must do includes:
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- simplify the tax code to close loopholes that help benefit the wealthiest Americans and special interest groups
- slashing corporate tax rates to create more jobs that are paying their workers higher wages
- providing tax relief for middle and lower-class families
- cutting taxes that help companies bring trillions in profit back into the US
Trump says that his "ideal" tax rate would be 15% for corporations, which is a staggering 20% drop from the current 35% that companies are paying. Many economists do not even believe it is possible to get a corporate tax level that low. Trump's logic behind this golden 15% level to get companies to provide more jobs which will help drive up wages as there are more competitive companies hiring for similar jobs. The competition will drive up wages.
However, the problem with this corporate tax cut is that it will cost the country about $2 trillion over the next 10 years. While lawmakers and politicians alike agree that a tax cut is a must to reach the levels of GDP that Trump has promised his supporters, many agree that a 15% corporate tax rate is virtually unattainable without costing serious problems with how much the US spends versus how much they receive in taxes.
While Trump has, on one hand, called for bipartisan collaboration on the tax relief bill but on the other hand states that anyone who doesn't vote for the bill, including Missouri Senator Claire McCaskill, must be "voted out of office". That statement has stunned and startled many senators on both sides as well.
Many politicians have stated a willingness to sit down and have a bipartisan conversation about tax reform. At the same time, many are uneasy with Trump's demands on tax reform as they do not know if this tax reformation is even possible. Moreover, it's unknown if a 15% corporate tax rate is even actually feasible and attainable. The lack of details within the demands that Trump has put on Congress is leaving many politicians uneasy. Either way, Congress is set to discuss tax reform and what actually happens remains to be seen.
Far as Trump himself is concerned, he can only hope that this tax reformation project is a more succesful than the bid they had to overhaul and replace Obamacare.