According to various sources this week, President Donald Trump has instructed his advisors to lower the corporate tax rate to 15 percent.
Currently, the U.S. has one of the highest corporate tax rates in the world at 35 percent. That ranks third among the top-20 highest marginal corporate tax rates in the world behind the United Arab Emirates (55.0 percent) and Puerto Rico (39.0 percent).
Stated in the New York Times Tuesday morning, “the White House is planning to formally roll out its tax plan on Wednesday, ending months of speculation about the president’s intentions for rewriting the tax code.”
Along with this purpose, U.S. Secretary of the Treasury Steve Mnuchin has mentioned that this could be the start of a broader tax plan by the Trump Administration that cuts middle-income tax rates, simplifies the tax code, and makes American companies more competitive worldwide.
If Trump can get these conservative changes through Congress, this would a big win for both U.S. businesses and workers.
One reason Trump appealed to many when he first launched his campaign was that he was not a politician, but instead a successful businessman. After eight years of economic stagnation, this is the very type of pro-growth change America needs.
If Mnuchin is correct, the economy is estimated to grow at or around three percent. That is not Ronald Reagan numbers (the Reagan years brought annual real GDP growth of 3.5 percent — 4.9 percent after the recession) but it is a lot better than Obama’s two terms (2.1 percent). With fewer deductions, this could offset increases to the federal deficit. Simultaneously, the U.S. Government should trim its spending after taking in a record $2.909 trillion dollars in the fiscal year 2016.
This all leads to the final point if the corporate tax is lowered, more jobs. As James Carvill famously said, it’s the economy, stupid. Lowering the corporate rate to 15 percent would allow businesses to grow, invest, and hire more workers. More workers equal more growth. That in return would also offset an increase in the federal debt which is a staggering 18.96 trillion dollars. All this benefits not only companies but middle and lower class workers which may see a hike in pay or additional jobs created.
The bottom line, if Trump wants to truly make America great again this would be a step in the right direction.