The Two Key Questions of Trump's Tax Proposal

Posted April 28, 2017

External Article: http://amplifier.gatech.edu/

Ivan Allen College School of Economics Professor Christine Ries wrote “The Two Key Questions of Trump's Tax Proposal” for the Georgia Tech Amplifier. April 28, 2017

Excerpt:

Tax programs can be used to raise revenue for the government, redistribute income or encourage economic growth. The plan just released by the president’s economic team is designed to promote growth, growth and growth.  They project the new plan will enable the economy to reach a growth rate of at least 3 percent up from our current sluggish rate of about 1.5 percent. Christine Ries, an economics professor at Georgia Tech, said the plan boosts income, innovation and job creation by changing incentives and reducing tax burdens on pro-growth activities. She said two questions remain:

Will it work? And will Congress pass it?

Absolutely. It always has in the past. 

Check out past pro-growth tax reform programs of Presidents Kennedy, Reagan and Bush 43. Compare growth rates of states with low income tax rates to those with high rates. 

Most people fail to understand the difference between tax levels and tax rates.  Pro-growth tax reform changes rates. The President’s plan lowers taxes on income, savings and investment to get the economy to produce more of all three.  This formula has been proven to increase economic growth substantially.  Also, over a short period of time, such programs result in big increases in revenue for the government.

Will it pass?

The plan dodges two major bullets:

First, the plan provides a base level of income, $24,000 for a married couple, below which taxpayers don’t pay.  Without having to worry about deductions, their income tax filing is simplified enormously. 

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