Trump’s ‘phenomenal’ tax plan? The real fight for 15

The real "fight for 15" should be a crusade to change income tax rates to 15 percent. That would be the "phenomenal tax plan" that President Trump wants.

Image capture Jacquie Kubin @CommDigiNews

WASHINGTON, February 10, 2017 — There is a movement underway to raise the national minimum wage to $15 per hour. It is called “the fight for 15.”

The real fight for 15 should be a crusade to change income tax rates to 15 percent. That would be the “phenomenal tax plan” that President Trump wants, and it would solve just about all of America’s economic problems.

Trump has said that he wants to cut personal and corporate income tax rates for all Americans. For business, he wants a 15 percent single rate; corporations would subtract expenses from revenues and then multiply the balance by 15 percent to find the tax due. Government accounting rules would determine allowable expenses. The 15 percent single tax rate would apply to all taxable income no matter how much is earned.

Trump’s plan is the perfect solution to an economy that hasn’t seen annual economic growth above 3 percent since 2005. This poor growth has led to a lack of opportunity, particularly for those at the lower end of the income scale. That in turn has pushed many workers out of the labor force and worsened income inequality.

The proposed cut in the corporate tax rate would give firms more capital to invest, which would lead to more economic growth. Opponents of the plan argue that the lower rate would just increase dividends to wealthy stockholders, making it just “another tax cut for the wealthy.”

Even if that were true, stockholders would reinvest these dividends back into the economy, which would still make investment capital available for expansion.

Reducing the corporate tax rate to 15 percent could generate sufficient cash flow to American corporations now manufacturing goods outside the U.S. to bring production home. The tax cut would offset the high labor cost in this country, which not only would bring jobs home, but also attract manufacturers from countries where the corporate tax rate is much higher than 15 percent.

A single rate tax system—as opposed to a progressive system where the tax rate increases as income rises—would be an incentive for successful firms to expand, since all new income would be taxed at the same 15 percent rate no matter how much was earned.

This same logic could be applied to the personal income tax.

All personal income above a livable minimum would be taxed at 15 percent. All income would be treated the same whether received as wages and salaries, rent, interest, profit, dividends or capital gains. There would be no deductions for anything.

The livable minimum could be set at twice the poverty level be adjusted based on the number of dependents and other special circumstances. That means that for a family of four, the livable minimum would be set at $50,000. The first $50,000 would not be taxed. For each dollar earned above $50,000 a 15 percent tax would be paid, no matter how many more dollars are earned.

If the income for the family of four were $70,000, then they would subtract the livable minimum of $50,000 leaving a taxable income of $20,000. Multiply the $20,000 times 15 percent and the household’s federal income tax bill would be $3,000.

This revenue-neutral plan would stimulate the economy by reducing taxes for the middle class; this would lead to an increase in total demand. By reducing taxes for upper-class investment, capital would be created to increase supply to meet the new demand. The economy would grow with little inflationary pressure.

Implementing this plan would be simple. The average tax return would involve a short form to complete, and we could get rid of the multi-million word IRS code along with the “Paper Work Reduction Act” verbiage that baffles even the most knowledgeable experts.

Trump is right to push for a 15 percent, single-rate, corporate income tax. He should also push for a 15 percent, single-rate, personal income tax. While this may be politically difficult to get through Congress, it is a plan worth fighting for.

Let’s all fight for 15. The right 15.

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