Understanding Tax Plans from Republican Candidates (rather than opting for self immolation)

With the release of Trumps tax plan, there are now four Republican candidates who have released their tax plans, Jeb!, Senator Rubio, Senator Paul and now Donald Trump.

The most striking thing about all these plans is that they all make the same basic assumption, that cutting taxes will stimulate the economy. Now, this sounds really comforting and vaguely familiar because it’s the same talking point Republican candidates have been using SINCE 1980. The idea is, itself, based on work done by Ibn Khaldun close to 700 years ago defining, essentially, the optimum level of taxation that allows for savings, investment, and economic growth while maximizing revenue for the government to provide services to the citizenry. Tax too much, people find a way to avoid any taxable activity, government revenue falls and government must run deficits to pay for services. Tax too little and people do just enough to get by or speculate, ruining economic growth and forcing the government to run deficits to finance needed services (sound familiar?). We are seeing the latter. During the Clinton years, we hit as close to optimal as we have come since the 1960s and since then, we’ve been sub-optimal, which means deficits and increasing federal debt as far as the eye can see.

Here are some of the numbers for what the Republicans tax plans will do to the deficit over the next 10 years…

Donald Trump – $12 trillion, Jeb Bush – $3.66 trillion, Sen. Marco Rubio – $4 trillion, Sen. Rand Paul – $3 trillion. These are all increases OVER current deficits.

The important thing to remember is that NONE of these plans will accelerate economic growth. In fact, they will likely reduce economic growth since more money will be placed into speculative activities rather than invested into the economy. As we saw during the credit crisis, which was largely driven by speculation on multiple levels, this usually leads to economic collapse. Given that these estimates are based in large part on the candidates own growth numbers, it’s entirely probable (not possible, probable) that these numbers are too low.

There’s also a feature, not a bug, in each of these plans that will heavily benefit those already in the upper income brackets while doing little if anything to benefit the bottom 95% of taxpayers. This will increase income and wealth inequality which I think we can all agree has a destabilizing effect on society as a whole. Massive inequality is how you get Communist revolutions.

So, if you’re a Republican voter who sincerely cares about the deficit and debt, you can’t support ANY of these plans. The only plan that makes sense is increasing taxes on the wealthiest 5%, investment income and eliminating a broad range of loopholes. We can talk about reducing the corporate tax rate all we want, but US corporations barely pay 17% effective on average so we’re already in a competitive position thanks to the loopholes and breaks already given to them. We really need to see corporations running about 22% with no loopholes.

Jobsanger has some great detail on the Trump plan and what it really means for the middle class.

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