Posted: 5/15/2016
Introduction
This a work in progress! I will try to address here only some of Trump’s positions.
This is based on Donald J. Trumps website, i.e. https://www.donaldjtrump.com/positions. His positions are a selected view and not very comprehensive. Hot topics like entitlement reform are missing (however, this might be a smart tactical move).
The Best Of Trump’s Positions
His very best position is the proposed corporate tax reform and the abolishment of the estate tax. His personal income tax reforms are much more questionable.
To reduce the business income tax to a low of 15% for businesses of all sizes has the potential for a jumpstart of an enormous economic boom the world has been waiting for since the global housing bubble burst in 2007. The Great Recession the world has suffered since then would quickly become distant memory.
His proposal to introduce a “one-time deemed repatriation of corporate cash held overseas at a significantly discounted 10% tax rate” is long overdue. Why the Republicans in the U.S. Congress have failed so miserably to act on this and to counteract the Obama administration’s stupid attempts to curtail corporate inversions is shameful.
Huge caveat: If Trump e.g. does not follow up with a drastic downsizing of federal government and a much more limited federal government plus promoting more federalism and state sovereignty, his business tax reform may likely not have the expected positive effects on the economy.
Second Best Of Trump’s Positions
Trump proposes to repeal ObamaCare, in particular to eliminate the individual mandate! This monster of government run health care has to go fast if the U.S. wants to survive as the country where the great experiment of human exceptionalism in individual freedom and responsibility started. Unfortunately, stupid politicians have already introduced too many socialist experiments to exert power and control over health care in the U.S. covering millions of Americans, e.g. MediCare and MediCaid!
The role of the U.S. Supreme Court justices (Chief Justice Roberts stands out) to defend ObamaCare was shameful! It only tells us, We The People, that these supreme justices have no clue about the Declaration of Independence and the intense discourse about the U.S. Constitution between Federalists and Antifederalists.
I am running out of time here, but I would say that most of Trump’s proposals regarding health care reform make a lot of sense. They are piecemeal, but appear politically feasible and they go in the right direction of more individual, private health care and more competition in health care.
A Critique of Trump’s Personal Income Tax Positions
I presume, Trumps position on this is based more on political feasibility than on principled convictions.
For any meaningful, rational personal income tax reform to be considered, some fundamental principles of a tax system should be first declared (which Trump has not):
What should be used as a base of taxation for government revenues (I presuppose that most people agree that government is but a necessary evil and needs revenues), e.g. income versus sales taxes or property taxes or sin taxes? Greedy politicians like to tax as many bases as they can to maximize revenues and to influence human behavior etc., which is wrong! Income from economic activity is the only base, which should be used as a base for taxation.
A tax system should be so conceived as to generate revenues only for the government. This means, the tax system should fair, mostly free of distortions, and simple and foremost be free of any welfare, subsidy or other social engineering considerations. Latter considerations should only occur on the expenditure side of the budget for all citizens to be able to be reviewed. E.g. the mortgage interest rate deduction is a serious violation of stated principles here (e.g. because it treats renters and homeowners very unfairly) and should be phased out. Similarly, the outrageous tax benefits for employer sponsored health care.
Is a separate corporate income tax (as is the case in many OECD countries) justified? Probably not!
A personal income tax should be very simple and fair. A poll tax or a flat tax rate would qualify. Any progressivity in the tax code should be avoided or eliminated. Any progressive taxation is truly a sin tax promoted by greedy, demagogue politicians propagandizing envy and class warfare
Back to Trump’s positions on personal income tax reform after having stated some fundamental principles of taxation first. Here is my summary:
Tax exempt income of $25,000/$50,000 for single/household taxpayers. Trump claims that about 75 million households would then pay no taxes and would have to file only an extremely simple tax return
Reduction of the current seven to four income tax brackets of 0%, 10%, 20%, and 25%. Thus, creating a new low 25% tax rate for top income earners. This would indeed create the lowest tax rates since before World War II in the U.S. To those many of the American citizens, who are challenged with remembering or knowing U.S. income tax history, the U.S. was attempting socialism by introducing and maintaining confiscatory high income tax rates for decades. Why the U.S. Supreme Court justices have ever allowed the U.S. Congress and the responsible U.S. Presidents to get away with that is shameful.
Elimination of the marriage penalty and the terrible Alternative Minimum Tax (AMT). The AMT (introduced in 1969) was clearly one of those too many socialist experiments in the U.S. This AMT is one of those glaring examples of legislation by too many incompetent, elected politicians. Why the Republicans and Democrats in the U.S. Congress at least since President Reagan have allowed this awful AMT to exist any longer is shameful. Why the US. Supreme Court justices did not strike down the AMT is shameful.
Trump’s positions on personal income tax reform sound great or don’t they:
It is absolutely a bad idea to remove “over 50% [of households] – from the income tax rolls”. In principle all or most households should share the burden of paying for government! Freedom is not free! As long as there is taxation, this is absolutely crucial for a civilized society to survive!
Trump obviously exposes and even exacerbates the known problems of graduated income taxation (using multiple brackets)! So over 50% of households would pay no taxes, but a taxpayer making $25,001 or one dollar more than the bracket amount would have to pay 10% or $2,500 in taxes? How fair is that? Why would any household like to make more than $50,000 annual income, to pay a minimum of $5,000 in taxes? This is a huge disincentive! Similarly, why would anyone like to earn more than $50,000 to pay then 20% taxes as opposed to 10% or couples to make more than $100,000.
Trump’s Position On Health Care For Veterans
Again, like with personal income taxation, Trump is fishing for votes in a particular group of voters. A principled approach gives way to political expediency.
What principles were sacrificed?
There should never have been a huge, (federal) government run health care system for veterans in the U.S. in the first place! This is another, terrible example how socialism encroached in the U.S. even in the country of the free and brave! It is shameful! Dependency on government hand outs etc.
Most of the medical needs of veterans can be handled by the private sector health care system
Yes, veterans ought to be treated special, but it their needs could be covered by federal and/or state government spending etc. when veterans need medical care or return to civilian life
Trump’s Position On U.S. China Trade
This is definitely not one of Trump’s finest hours. Clearly, he is trying to fish for votes more than anything else. Trump like so many other politicians uses terrible, political jargon like “level playing field” or “fair trade”. Like beauty, “fair trade” is very much in the eye of the beholder.
Brief summary of Trump’s position and comments:
China is a “currency manipulator”.
[Well Mr. Trump, the worst currency manipulator has been the U.S. for at least over a decade! Even if China was supposedly a “currency manipulator”, a government controlled valuation of a currency is both beneficial and disadvantageous. This is probably one of his dumbest positions of Mr. Trump]
“America has always been a trading nation.”
[Unfortunately, the U.S. has been everything else but a free trading nation since the beginning in 1787. Trade protectionism has always been a part of U.S. policy. Alexander Hamilton was proponent of the misguided infant industry argument. E.g. the terrible Smoot-Hawley Tariffs of 1930, which contributed to the Great Depression.]
“Since China joined the WTO, Americans have witnessed the closure of more than 50,000 factories and the loss of tens of millions of jobs. It was not a good deal for America then and it’s a bad deal now. It is a typical example of how politicians in Washington have failed our country.”
[This, Mr. Trump, is a very short-sighted argument! The U.S. has and will benefit greatly that 100s of millions of Chinese people have experienced prosperity thanks to the opening of the U.S. market for Chinese goods. Chinese customers are buying U.S. products. Large numbers of Chinese tourists and investors are coming to the U.S. for leisure and to do business. Outsourcing as every intelligent and educated person knows is only one, very narrow side of the story, e.g. insourcing and investment are other ones.]
“Our goal is not protectionism but accountability. America fully opened its markets to China but China has not reciprocated. Its Great Wall of Protectionism uses unlawful tariff and non-tariff barriers to keep American companies out of China and to tilt the playing field in their favor.”
[As I said above, the U.S. is infamous for its many trade protections in favor of special interests (e.g. agriculture, steel and many more). If China negotiates to lift U.S. trade protections, then Trump will have to relent or?]
“If you give American workers a level playing field, they will win. At its heart, this plan is a negotiating strategy to bring fairness to our trade with China.”
[As I alluded above, fairness is a two way street.]
“Protect American ingenuity and investment by forcing China to uphold intellectual property laws and stop their unfair and unlawful practice of forcing U.S. companies to share proprietary technology with Chinese competitors as a condition of entry to China’s market.”
[China (or India) could well argue that Western intellectual property rights are extreme and excessive and that China (or India) do not want any part of this. Trump has a point when he criticizes the Chinese practice of forcing technology sharing on Western companies doing business in China.]
“Reclaim millions of American jobs and reviving American manufacturing by putting an end to China’s illegal export subsidies and lax labor and environmental standards. … China’s woeful lack of reasonable environmental and labor standards represent yet another form of unacceptable export subsidy. … Chinese manufacturers and other exporters receive numerous illegal export subsidies from the Chinese government. These include - in direct contradiction to WTO rules - free or nearly free rent, utilities, raw materials, and many other services. China’s state-run banks routinely extend loans these enterprises at below market rates or without the expectation they will be repaid. China even offers them illegal tax breaks or rebates as well as cash bonuses to stimulate exports.”
[Trump is totally wrong here!. The U.S. subsidizes its exports too. Again, China (or India) cannot be forced to follow the frequently excessive and exaggerated environmental protection standards of Western countries. Western environmental standards have served many times as justifications for numerous forms of trade protectionism. Environmental protection can be done in many different ways and so forth, perhaps China (or India) will come up with even better solutions. If the Chinese government is willing to bankrupt itself with those kind of profligate largesse, why not let them do it.]
“Strengthen our negotiating position by lowering our corporate tax rate to keep American companies and jobs here at home, attacking our debt and deficit so China cannot use financial blackmail against us, and bolstering the U.S. military presence in the East and South China Seas to discourage Chinese adventurism.”
[One of the very few things on foreign trade, where Trump gets it right! Unilateral measures like strengthening the domestic economy by improving competition or by promoting fiscal prudence and sound fiscal finance are so much better for more free trade than managed trade or trade protectionism!]
“China’s ongoing theft of intellectual property may be the greatest transfer of wealth in history. This theft costs the U.S. over $300 billion and millions of jobs each year. China’s government ignores this rampant cyber crime and, in other cases, actively encourages or even sponsors it –without any real consequences. China’s cyber lawlessness threatens our prosperity, privacy and national security. ”
[I am not sure why Trump put this point under U.S. - China Trade Reform positions. If the Chinese government engages in this kind of cybercrime it should be publicly exposed by Western governments and the perpetrators in China should be indicted.]
Preliminary And Brief Conclusion
Despite Trump’s many severe mistakes, two of his positions stand out so much that he is electable in lieu of a better alternative:
Trump’s business tax reforms
Trump’s position on health care reform
