Structurally, Donald Trump’s tax plan is pretty much like every other Republican tax reform proposal. Nothing really new or exciting to sink your teeth into. Fewer individual tax brackets, lower rates, elimination of the Alternative Minimum Tax, a lower corporate tax rate, and elimination of the estate tax. A little hoopla about repatriating foreign earnings of U.S. corporations and taxing hedge fund billionaires at higher rates, but these are issues that largely go away under any reform proposal that calls for lower rates.
The thing that really distinguishes Trump’s proposal from the others is the size of the deficit it is projected to generate – a whopping $12 trillion over ten years according to the Tax Foundation, or $10.14 trillion if scored “dynamically” – factoring in economic growth. Either way, the U.S. debt debt would increase by more than 50 percent. That’s significantly larger than the deficits projected by the Tax Foundation for some of the other candidates’ plans: $3.66 trillion for the Bush plan, $4 trillion for the Rubio plan, and $3 trillion under Rand Paul’s proposal. What that also means, of course, is that Trump’s proposed tax cuts really are significantly broader and deeper than those proposed under competing Republican proposals. That’s good if you like lower taxes, but troubling if you’re concerned with the growing U.S. debt burden. An increased deficit of the magnitude projected by the Tax Foundation would pose a serious problem.
Trump has criticized the Tax Foundation analysis, saying they’re always wrong. If you can buy into the notion that a Trump presidency will foster far greater economic growth than anything currently projected by the Tax Foundation, and far greater than anything his opponents are capable of generating, maybe his tax plan is not so silly. In other words, you’ve got to have faith in Donald to believe in his tax plan. Perhaps that’s too much to ask. I don’t know.
In November, 2004, the citizens of Arlington, Texas, of which I was one, were asked to vote on a referendum to help pay for a new Dallas Cowboys stadium. If approved, the City of Arlington would pay for half the cost of the stadium (capped at $325 million). I was not in favor of the referendum. Every study, book and article I read about sports stadiums concluded that they were not good generators of economic growth, and not a good use of municipal funds. The memorandum passed; and I was wrong. All of those studies were well researched and carefully written. But they all left out one important factor — Jerry Jones. He didn’t just build a stadium; he built a world class stadium. He didn’t just host a dozen or so football games a year; he kept the stadium humming week after week with concerts, boxing matches, soccer games, and anything else you can imagine. Sales tax revenue in Arlington in Arlington exceeded all expectations. Love him or hate him, one man – Jerry Jones – made a huge difference. Maybe most sports stadiums aren’t a suitable investment vehicle for taxpayer dollars. And maybe most tax reform plans that appear to generate a large deficit aren’t very wise. But every once in a while the standard analyses just don’t apply.