Crippled America: How to Make America Great Again Hardcover Donald Trump (2016)
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A TAX CODE THAT WORKS
THE ONE THING THAT everybody agrees about is that our tax system doesn’t work. The current code is crazy. The federal tax code is 74,608 pages long. Nobody can really understand it, not even the accountants who try to help taxpayers fill out their forms. An entire industry springs up every year just to help Americans figure out how much money they owe to the government.
The reality is that the current tax code takes too much money from the people who need it most, while allowing others to find ways to reduce their tax burden. It discourages major corporations from reinvesting foreign profits here at home and makes it hard for small businesses to grow. It absolutely destroys jobs rather than helping create them.
A sensible tax plan would provide tax relief for middle-class Americans, allowing hardworking people to keep more of their own money; it would reduce the taxpayers’ annual anxiety and frustration by simplifying the whole tax code; it would grow the economy and create jobs by discouraging corporate inversions and make America competitive around the world; and it wouldn’t add to either our debt or deficit.
The tax reforms I’m proposing address all those problems by simplifying the tax code for everybody: My goal is to put H&R Block out of business.
I described these solutions in an op-ed piece that appeared in the Wall Street Journal in late September 2015: “Tax Reform for Security and Prosperity,” it was called.
I wrote that the top priority for the government of the United States should be to provide security for its people. That security includes removing uncertainty and making sure that the economic future of the country is assured through better deals, smarter trade agreements, and tax policies that unburden the middle class and unleash the private sector.
My approach to tax policy will do just what needs to be done. For all Americans the uncertainty and complexity of a tax code written for special interests and the very rich will be removed and a clear future will be available for all.
The plan has several goals. Let me make it clear that this set of policies takes dead aim at eliminating deductions and loopholes available to special interests and the very rich, as well as those deductions made redundant or unnecessary by the much lower tax rates every person and business will be paying.
In particular, I am proposing ending the current treatment of carried interest for hedge funds and other speculative partnerships that do not grow businesses or create jobs.
The first goal of the plan will be to provide tax relief. If you are single and earning less than $25,000 or married and earning less than $50,000, you will not owe any income tax. This will immediately remove some nearly 75 million households from the income tax rolls.
Second, the tax code will be simplified. Instead of multiple tax brackets with multiple variations, there will be only four brackets: 0%, 10%, 20%, and 25%. This new code eliminates the marriage penalty and the Alternative Minimum Tax while providing the lowest tax rates since before World War II. Further, this plan eliminates the death tax, thus allowing families to keep what has been earned.
The proposed policies will allow the middle class to keep most of their deductions while eliminating many of the deductions for the very rich. With more money in middle-class pockets, consumer spending will increase, college savings will grow, and personal debt will decline.
Third, we need to grow the American economy. For the past seven years our economy has been at a virtual standstill. Growth in the Gross Domestic Product of less than 2 percent per year is pathetic. We need to spur production, bring home jobs, and make it easier to invest in America.
The plan states that any business of any size will pay no more than 15 percent of their business income in taxes. This low rate will make corporate inversions unnecessary and will make America one of the most competitive markets in the world. This plan will also require companies with off-shore capital to bring that money back to the United States at a repatriation rate of only 10 percent. Right now that money is not being brought back because the tax rate is so high.
Finally, this plan will not add to our deficits or our national debt. With disciplined budget management and elimination of waste, fraud, and abuse, this plan will allow us to balance the budget, grow the economy at record levels, clear the backlog of workers sitting at home, and begin the process of reducing our debt. With moderate growth, this plan will be revenue neutral. These changes will ensure huge economic growth, and this country will be on the road to extraordinary prosperity.
This tax policy has the economic well-being of the country and its citizens at the forefront. This plan is bold, but it is also cast in reality and common sense. Growing the economy will provide the security we need to make America great again.
While my op-ed summed it up, there are other important points to make: When the income tax was first introduced, only one percent of Americans were taxed. It was never intended to be a tax on most Americans. Under this plan the income tax will be eliminated for nearly 75 million households, and 42 million households that now have to file complex forms that they often need expert advice just to figure out they don’t owe anything will file a one-page form that will save them time, anxiety, frustration—and more than an average of $100 in preparation costs. More than 31 million households will also use the simplified form—and they get to keep almost $1,000 of the money they have worked for.
The great reduction in rates will make a lot of the current exemptions and deductions—part of the reason the forms are so complicated—unnecessary and redundant. But the deductions for charitable donations and on mortgage interest won’t be touched. Those deductions have been very successful in accomplishing their objectives—assisting America’s charities and helping people own their own homes. It also eliminates the death tax, because you earned that money and already paid taxes on it. You saved it for your family. The government already took its bite; it isn’t entitled to more of it.
Our current tax code actually discourages business growth and penalizes success. Too many companies, from our biggest brands to innovative start-ups, are moving their headquarters out of the country, either directly or through corporate inversions. In an inversion a company moves its legal headquarters to a lower-tax nation and pays taxes there. It isn’t illegal or dishonest or even unpatriotic, it’s just good business. Any business that does not take advantage of the opportunity to increase revenue by lowering its taxes isn’t being properly managed. The Democrats want to make inversions illegal, but that isn’t going to work. Whatever laws they pass, with literally billions of dollars at stake, corporations will find methods to get around them. It makes a lot more sense to create an environment that welcomes business.
Under Ronald Reagan we had the best corporate tax rate in the industrialized world. Now we’ve got the worst. Rather than working with our corporations to rebuild our economy and create millions of jobs, we’re practically forcing them to relocate. This tax plan would cut the corporate tax rate to 15 percent—for our small businesses and freelancers as well as the big corporations. Small businesses are the true engine of our economy. According to the Council of Economic Advisors, American small businesses create 60 percent of our new jobs. But when tax credits and deductions are included, most small businesses are actually taxed at a higher rate than large corporations. Under existing tax law, sole proprietors, freelancers, unincorporated small businesses, and pass-through entities are taxed at the higher personal income tax rates. In reality, they are often taxed at twice the rate corporations actually pay. With the Internet changing the structure of the business world and encouraging start-ups, there are more of these than ever before. This is where our economic future is being built, where every dollar counts, and our tax code makes it tough for them to survive.
As long as these businesses are unfairly taxed at personal income rates, they will be at a huge disadvantage. The right plan would create a new 15 percent business tax rate within the personal income tax code that would substantially reduce taxes and help these businesses succeed and grow.
As you read this, American-owned corporations have as much as $2.5 trillion in cash sitting overseas. Just imagine what would happen if our corporations brought that money home. How many jobs would be created? Currently, they don’t bring it home because the tax rate here is much higher than they are paying in other countries. A key component of this plan is a onetime repatriation of corporate cash now held overseas at a 10 percent tax rate. Under this plan, corporations would profit tremendously by bringing home that $2.5 trillion and putting it to work—while benefitting from the globally competitive, newly lowered corporate rate.
The big question everybody will ask is, How do you pay for this wonderful plan? The good news is that it is revenue neutral—and that’s before the economic growth that will be triggered by putting more money in your pocket and by the new jobs that will be created. This plan will be paid for by reducing or eliminating most of the deductions and loopholes that allow the very rich to pay lower taxes, by the repatriation of corporate cash held overseas, by putting an end to allowing corporations to defer taxes on income earned outside this country, and by cutting down or eliminating those corporate loopholes catering to special interests—in addition to those deductions that are made redundant or unnecessary by lowering the tax rate on corporations and business income. A reasonable rate of the deductibility of business interest expenses will also be phased in.
We also must finally reduce waste. Billions and billions of dollars are wasted annually, and nobody seems accountable. All politicians in every election cycle promise to reduce waste in spending. When was the last time you heard of government actually doing that? I’ll answer that: Never. In business you learn that small savings very quickly become large savings. When you’re spending your own money, you learn how to eliminate waste. The next president has to stop throwing your money away. Save a few billion here, a few billion there, and before you know it, you’ve made a real dent in spending.
This waste isn’t difficult to find. In 2013, Business Insider’s Walter Hickey went through the reports of each government agency’s Inspector General and pretty easily identified $15 billion in quick savings, ranging from the $42 million given to a college by the Department of Education—that was ineligible to receive any federal funds, to the $2.7 billion that the Department of Health and Human Services could save just by reexamining the price that Medicaid and Medicare should pay for wholesale prescription drugs.
In 2015, the Citizens Against Government Waste issued its Prime Cuts report, showing how $648 billion could be cut from the 2016 budget without causing harm. $9.6 billion could be saved by ending the Rural Utilities Service program that makes loans and grants to utilities in underserved parts of the country—in one rural Arkansas town the government spent $5,500 per resident of your tax dollars to provide broadband access. It also points out the cost of a lack of supervision of different programs, noting that there are 6.5 million active social security accounts issued to people that supposedly are 112 years old or older—although there were only 35 known people of that age. And a lot of people have estimated that there is more than $100 billion in waste in the Medicare program.
The point is that we throw away billions of dollars every single year, and the next president has to finally do something to stop it.
It’s time we finally brought our tax system up to date by reducing the burden on most Americans, simplifying the system for everyone, providing a sensible policy for large corporations and small businesses, and cutting out the billions of your dollars we waste every year … and then, to top it all off, bring our jobs back home where they belong.