Will Trump’s Tax Plan Really Benefit the Economy?

When Donald Trump unveiled his new tax plan – an extremely undetailed plan, mind you, at just one page — it came with a promise that the proposed massive tax cuts would be a boon for economic growth.

While it’s clear that businesses and the wealthy — which would see their taxes decrease by more than half — are the big winners here, Americans might want to think twice before buying into the common Republican talking point that reducing taxes is beneficial to the economy.

The research

A few years ago, the Congressional Research Service released a study examining how taxes affected the economy over a span of 65 years. Although tax rates have changed many times under various administrations over those decades, the CRS was able to conclude that reductions in the tax rate did not correlate with economic growth.

To be clear, that’s not to say that tax cuts have a negative impact on the economy either.

Rather, researchers do not consider tax rates to be a good predictor of changes in the economy. They can point to various instances in 20th century American history when both raising and lowering taxes had beneficial effects on the overall economy, with evidence of the opposite trend as well.

In other words, Trump can claim that cutting taxes will improve the economy, but he has no reason to believe that will actually come to pass.

What happens following a tax cut? 

You know what the research was able to demonstrate, though? That cutting taxes on the rich routinely correlates with expanding wealth inequality. Unsurprisingly, when the government allows its richest citizens to keep more of their income, the economic disparity between America’s rich and poor only widens.

This idea sounds like a bad deal for the majority of Americans, but it’s perfectly acceptable to our Congress. After all, the group is made up of millionaires and often serves the interests of wealthy donors first and foremost.

How about that debt?

Actually, that’s another issue most economists seem to agree on: Trump’s tax plan will likely sink the United States even further into debt. If you’re providing corporations and the richest citizens that many tax breaks and loopholes, the government will lose much of its revenue.

By a New York Times estimate, eliminating these taxes will leave the country with around $5 trillion in additional debt over the next decade.

At this point, even Trump’s supporters don’t seem particularly surprised when he says one thing and does another. Nevertheless, his tax plan represents a massive departure from the debt-shrinking platform on which he campaigned.

One year ago, Trump pledged to eliminate the national debt within eight years. Granted, it was always a far-fetched notion considering that the U.S. is over $19 trillion in debt. The country has consistently been in debt for nearly two centuries.

Trump’s team insists that the by cutting taxes, the economy will grow enough to offset the debt. But as previously discussed, this claim is not based in reality.

The Times spoke to Douglas Holtz-Eakin, a conservative economist who once led the Congressional Budget Office, and he found the Trump plan outrageous.

“I want a plan that’s focused on growth as much as anyone, but these tax cuts are not going to pay for themselves,” said Holtz-Eakin. “If you believe that, you’re kidding yourself.”

Is Trump kidding himself on this issue? Perhaps, but he also has to be aware that these kinds of tax cuts will benefit him personally.

That’s the kind of decision we should have anticipated from a billionaire business tycoon — no matter how much he tried to appeal to the working class during his campaign.

Photo Credit: Michael Vadon/Flickr


Marie W
Marie Wabout a year ago

Thanks for posting

S M1 years ago

'Chris Van Hollen has written to Deutsche Bank asking for assurances that it will not use the president’s outstanding multimillion-dollar loans as “leverage”. The Democratic senator is also demanding to know whether the bank has restructured Trump’s debt or sold it to “foreign entities”.'


Dan Blossfeld
Dan Blossfeld1 years ago

Brian F.,
Better check your facts. Some corporations actually paid higher rates than that. The average fit the S&P 100 was 28% -- only slightly lower.


The reason that the marginal tax rate was so high in 1950 (and so few actually pays) was to pay off the massive debt incurred due to WWII. I seriously doubt that people today are willing to pay off another world war.

David F
David F1 years ago

Small mom and Pop business now have to cough up 35% federal tax with states average 39%
President Trump is dropping the rate to 15% so America can compete with the other 95% of the planet.


Rhoberta E
Rhoberta E1 years ago

david f
I'm not sure how you get YOUR facts about his tax plans that was one page and basically gave the 3 most important things to big corporations like his and his swamp buddies.
You tube put forth by you is about your speed for factual information

David F
David F1 years ago

Here's how clueless Obama was.
Jobs under Obama. YouTube:

Shelley w
Shelley w1 years ago

Trump will be significantly reducing the tax burden for small businesses in stark contrast to Obama who had hiked them. It is the middle class that will benefit from this and help them prosper. Reducing needless government redtape and simplifying the tax code are also excellent goals that Trump is trying to accomplish.
Obama is getting $400,000 for one speech to Wall St. Why would he be getting this payoff? His anti-Wall St. rhetoric was all just a hypocritical big show!

David F
David F1 years ago

Roberta Bloviating E. show us your links :-)

Rhoberta E
Rhoberta E1 years ago

david f
You're full of it as usual.
Get your facts straight about jobs under President Obama. You're just fake, period

David F
David F1 years ago

Half story, Kevin Mathews again spews fake news thru Care2 by censoring the most important facts about Trumps Tax and regulation Plan.
US business that have been suppressed by Democrat overregulation and taxes haven't been this confident since the Bush Presidency.

The DOW daily closing stock market average rose more than 15% since the election on November.
The US Stock Market gained $2 trillion in wealth since Trump was elected!
The S&P 500 broke $20 Trillion for the first time in its history.
President Trump decreased the US Debt in his first 100 days by $100 Billion. (President Obama increased the US debt in his first 100 days by more than $560 Billion.)
The US Manufacturing Index soared to a 33 year high in this period which were the best numbers since 1983 under President Reagan.
President Trump added 298,000 jobs in his first month alone (after President Obama said jobs were not coming back!).
Housing sales are red-hot. In 2011, houses for sale were on the market an average 84 days. This year, it's just 45 days.