Taxes form the backbone of the relationship between government and the governed, revealing most starkly what we value as a society. Spoiler alert: We value business owners and investors.
The most dramatic proposal to emerge from “The Unified Framework For Fixing Our Broken Tax Code” announced last Wednesday from GOP leadership in Congress and President Trump is the drop in the top corporate tax rate from 35 percent to 20 percent. Other provisions to encourage more investment and business growth include:
The net effect of this sweeping tax reform would dramatically lower the burden of taxes on businesses. Initial estimates of lower tax revenues as a result of the proposal cite $5 trillion less in revenue, and possibly $1.5 trillion in increased federal debt, over the next 10 years.
Do not get overly distracted by proposals regarding household or individual taxation, because the framework’s central bet is the following: If businesses are the job creators and businesses make most investments in this country, then businesses will be the engine of economic growth and national economic strength. Treat businesses well, and plentiful jobs, higher salaries, increased investment, and national prosperity will follow. That’s the guiding theory of this tax reform. If that theory turns out to be true, this reform will be hailed by future generations as a smashing success.
On the individual and household side, the proposal would reduce the need for most itemization on a tax return by doubling standard household deductions, and it proposes three individual and household tax brackets, with an option for a fourth bracket, targeted at higher earners.
