Editor’s note: This is the first of a three-part series on impending tax reform featuring an exclusive interview on Liberty Nation Radio with Stephen Moore, famed free-market economist and key advisor to Donald Trump during the 2016 presidential campaign. In this part, Moore discusses the efficacy of corporate and individual rate reductions.
As President Trump continues on his 12 day trip through Asia, the wrangling continues back home over a domestic initiative that may well become the most significant of his four-year term: tax reform.
With Senate Republicans set to unveil their tax proposal on Thursday, following the release of the House plan last week, the stakes are running very high for a GOP that has repeatedly failed to repeal and replace Obamacare and suffered lopsided defeats in the Virginia and New Jersey Governor’s races on Tuesday. If the GOP fails to close the deal on tax reform, they face the realistic prospect of losing control of one or both chambers of Congress in next year’s midterm elections.
Few people are better positioned to evaluate the House Republican tax reform proposal than the key economic adviser to Donald Trump during the presidential race. Stephen Moore, famed economist and founder of the Club for Growth, joined us for an exclusive interview on Liberty Nation Radio to opine on the merits of this sweeping reform, the first since the days of Ronald Reagan:
Tim Donner: The Republicans are trying to pass a bill to reform both personal and corporate taxes. The corporate rate drops a lot from 35 to 20%, plus, there’s provisions for repatriating, bringing back to the US corporate profits that are sheltered overseas, and there’s more favorable treatment of foreign profits, in general. It seems like most of the energy in this tax reform is more on the corporate than individual side and, yet, polls are showing that a clear majority of the American people are against lowering corporate taxes. Tell us how this corporate tax reform will benefit the little guy who’s most concerned with lowering his own taxes.
Stephen Moore: Well, let me start by saying that this doesn’t just cut the corporate tax. It does, but it also cuts the tax for 27 million small businesses, so that’s a big deal, Tim, and 2/3 of our jobs come from small and medium-size businesses, so we want to give them a tax cut so their rate falls to 25% or lower, depending on the income tax bracket. That’s going to help small business men and women hire more workers, purchase another truck or another computer or grow their business. The answer to how this all helps workers is, look, you need healthy businesses to have healthy jobs. It’s really simple. I don’t understand why Nancy Pelosi and Chuck Schumer don’t understand that, but I think most people understand that when their employer is doing better and the business is prospering, then they can expand the business, they can pay their workers more, etc.
On the corporate side, it’s very simple. We have a corporate tax rate on American businesses that’s almost twice as high as the corporate rate in every other country, and that puts us at a huge competitive disadvantage, and Trump is right. We need a pro-business tax code that puts America first, and this will do that. By the way, I don’t think it’s even going to cost any money because you’re going to get so many businesses moving back to the United States that I think it could actually raise more than it loses.
Tim Donner All right. Let’s talk about the individual or personal side of this tax reform. The seven rates that we used to have are collapsed into four rates, ranging from 12 to 39%. The personal deduction is almost doubled from 12 to around 24,000. Of course, the left has, as predictably as the sun rising in the east and true to their mantra on everything the Republicans have tried to do for decades now, called this a scheme to line the already deep pockets of the rich. Tell us why it isn’t.
Stephen Moore: Well, I think these liberals actually believe the sun rises in the west…
Tim Donner: These days, I wouldn’t dismiss that notion.
Stephen Moore: Look, everybody who pays taxes is going to get the tax cut. If you’re a middle-class family that makes about $80,000 or 80-90,000, and for a couple in Virginia with two spouses working, that’s basically a policeman married to a school teacher. They are going to save about 2,500 to $3,000 a year on their taxes, and that’s significant. People are really financially pinched right now with the rising cost of healthcare and education and just paying the bills. It’s a tax cut for everybody if you’re paying because we don’t give a tax cut to you if you don’t pay taxes, but in terms of, for example, the how this will benefit the middle class, I want to go back to business taxes for a minute. We believe that about 2/3 of the benefit of cutting the business taxes, the benefits will be derived by the workers because when the business invests more, businesses can pay higher salaries.
Kevin Hassett, who’s the head of the Council of Economic Advisers at the White House, a good friend and a guy who worked at the American Enterprise Institute, one of the top economists in the country, says that they believe that this will lead over a few years to about $4,000 a year increase in the pay for the average American worker. That’s a big deal for workers who haven’t had a pay raise in 15 years.
In the second part of this series tomorrow, Stephen Moore discusses whether this tax reform plan will increase already massive federal deficits, and how this plan will get rid of corporate loopholes.