President trump is moving in the right direction, focusing on bringing our dilapidated national tax system. But still he has taken entirely the wrong steps.
We desperately need tax reform. True reform requires difficult decisions, determine which measures work and which do not, and not just proposals of tax cuts for all. Lowering tax rates is important, it is the engine of growth, but you can’t let be fooled: they don’t pay for themselves.
The President understands what we are facing challenges. We have a low growth rate, our tax rate on the profit of businesses is the highest in the developed world, our strategy in relation to international taxation is a nightmare, and income tax every year becomes more confusing and unclear.
But these problems cannot be solved just by reducing all taxes on businesses to 15% and reducing the taxes of individuals. In fact the current President’s offer is likely to worsen the prospects for economic growth in our country, inflating our record-high national debt.
The President’s plan could increase the national debt by over 5 trillion dollars over the next ten years. As a result, our debt will grow to even higher performance of the economy in our history.
When it comes to saving taxes, is always a crowd of hunters for free cheese, claiming that if we cut taxes, they will pay themselves at the expense of economic growth. But here in the real world, thoughtful, calculated on economic growth, tax cuts can, at best, to cover part of their cost. In fact, significant tax cuts can harm economic growth, creating a huge debt burden.
So if the original trump proposal is unacceptable, what should we do?
The first step is well thought out with all the responsibility of the tax reform with business. The average tax rate for businesses in the affluent countries by 10% below our that gives them a competitive advantage. America is the greatest economy in the world, and if we can reduce our tax on commercial enterprises to 25% or even 28%, we will restore their competitiveness. We need to Fund this tax cut, putting an end to the tax benefits that accompany one of the companies at the expense of others, distorting decision-making related to business. We can also increase revenue by shifting taxation from mobile business of the shareholders who are the real profit from corporate income. We can cut the rate by a more aggressive tax increase.
The second step is to tidy and simplify the system of taxation of citizens. Most of the annual benefits of US $ 1.6 trillion apply to individual taxpayers, this is largely for better-off Americans, and most of them complicates and harms economic efficiency. The more benefits we will be able to cancel or reform the better. A large part of the income can be spent on reducing rates for individuals; some part must be spent on deficit reduction. Idea is able to bring trillions and I worked with Marty Feldstein (Marty Feldstein) and Dan Tinbergen (Dan Feenberg), consists in introducing a maximum level of tax benefits — establishing them on the level of a certain percentage of income.
The administration of President may keep all the tax benefits that it wants to protect (for example, deduction of mortgage payments), but include them in this limit.
The third step is to reform our social protection programmes. Social security, healthcare, interest costs account for 82% of the projected expenditure growth in the next decade, like social security and Medicare is facing bankruptcy. Thought-out reforms can improve health care costs, promote work, strengthen retirement security and reduce long-term debt, while protecting the most vulnerable.
The last step is to do everything possible to maintain economic growth. While promises annual growth of 4% are the fantasy of clean water, we need to raise its rates much higher than 2%. The acceleration of economic growth should be conducted as widely as possible to lift all incomes, improve the General welfare and remedy the situation with taxation. To achieve accelerate growth policy needs to operate at full capacity, conducting tax reform, social protection programmes, as well as regulations, immigration law, Federal investment, trade and energy. The main objective of economic growth is to regain control of our national debt.
As a state we can’t pretend can turn any hard choices. But the President’s rights, focusing on economic growth. If we don’t force our economy to grow again, the American dream can go down in history.
Maya Mcginnes — Chairman of the nonpartisan Committee for a responsible Federal budget.