In a presidency riddled with blunders and bad decisions, President Donald Trump loses the trust of more Americans every day, including many of his own supporters; however, by reforming the tax system, President Trump can make up for the disastrous start to his presidency.
According to a Gallup Poll, the economy was the most important issue among Republicans, Democrats and Independents in the 2016 Election. A tax reform bill will have a profound impact on the economy, so it is imperative that President Trump puts a good deal of time and effort into negotiating the content of this tax reform bill.
Because Congress is extremely divided, President Trump will need to bring Democrats and Republicans together and form a compromise to get a tax reform bill passed. Constructing a bill will be difficult given the difference of views between moderates and radicals on both sides, but there isn’t a big enough majority in Congress for the Republicans to pass tax reform without the help of the Democrats. The best plan for the President is to begin working on policy that both sides of the aisle can agree with and then transition into more controversial topics.
In order for President Trump to see a positive effect on the economy, his reform plan must include two key components: massive income tax relief for the lower and middle classes and the closure of corporate tax loopholes.
The middle class must receive large tax cuts to relieve their financial burden from the government. Tax cuts to the middle class will give citizens more disposable income, and because many lower and middle income earners have trouble paying for healthcare and education, this increase in disposable income will allow these Americans to rely less on the government.
In addition to the government giving tax cuts to the middle class, the Child Tax Credit, which deducts a certain amount of money from a person’s taxes based upon the number of children the person has, along with other tax deductions, should be expanded. The Center on Budget and Policy Priorities states, “In 2015, the CTC (child tax credit) protected 2.8 million people from poverty, including 1.6 million children,” and “an increase in family income of $1,000 is associated with an increase in children’s test scores and college enrollment rates.” The Child Tax Credit give families financial relief and improves improves children’s prospects for the future.
The Earned Income Tax Credit, which mainly gives tax deductions to working parents with children with the purpose of rewarding work and raising living standards, should also be expanded. The Center of Budget and Policy Priorities claims, “The EITC significantly increases recipients’ work effort, according to substantial research over the past two decades.” The Earned Income Tax Credit is similar to the CTC in that it helps struggling or working families with raising children, so workers in the family don’t have to worry as much about the financial burdens related to raising their children.
Trump and Congress should close loopholes that corporations use to avoid paying taxes here in the United States. According to the New York Times, an analysis of 238 of the Fortune 500 companies found that some companies paid almost nothing in corporate taxes. According to a report done by the U.S. Public Interest Research Group Education Fund, corporations are dodging around 90 billion dollars in taxes every year and are holding 2.1 trillion dollars in offshore investments.
Ninety billion dollars is enough money to pay for free public college tuition for all Americans, which is estimated to cost around 75 billion dollars a year. By closing loopholes, the government is essentially requiring corporations to follow the tax law that is already in place and provide tax dollars that have the potential to benefit everyday Americans. It also makes sense that the debate about the exact percentage of the corporate tax rate come after closing the corporate tax loopholes.
By cutting taxes for the lower and middle classes, we will give relief to many Americans who are struggling financially while creating economic growth because these Americans will have more disposable income to put back into the economy through investments and everyday purchases. At the same time, closing tax loopholes for corporations will bring in more revenue to make up for tax cuts, will add to the budget of government programs and will force corporations to pay their fair share of taxes.