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Trump tax plan helps wealthy, hurts everybody else

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Trump tax plan helps wealthy, hurts everybody else

Owen Stewart, Sports Editor

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“Make America Great Again.” That’s all we hear, over and over again, from Donald Trump throughout his campaign and now his undeserved presidency. The truth is, the economy was already doing great under Barack Obama. The US is currently in the midst of the longest uninterrupted expansion (over nine years) the economy has ever seen, and the unemployment rate of 4.1% is essentially right at the ideal rate (4 percent). However, most economists agree that we’re getting close to, if we’re not already at, the peak of economic growth. This isn’t fake news. This isn’t just one person, or one source. This is a non-partisan issue that has to do with the well-being of the American people as a whole. Donald Trump’s new tax plan, passed by Congress recently, isn’t going to make America great again. In fact, it’s going to do the exact opposite.

It is basic macroeconomic policy (which has been in place since the 1980’s and has stabilized the economy) that when the economy is in an expansion, taxes should be slightly raised, as people have more spending money, and the ever-growing national debt should be paid off with the surplus created through increased government collection of funds. However, Trump has stated that he wants to increase the growth of the economy to 4%, which isn’t going to happen from his plan (economists believe it will increase growth by 0.1%), and even if it did happen, it would be an unhealthy stimulus to the economy. The last few tax cuts have decreased tax revenue, which proves that our country is on the left side of the Laffer Curve, a measurement created to show the relationship between taxation and revenue gained from taxes. Unless an unknown development has occurred in the last few years, it is certain that the US is still on the left side of the Laffer Curve, meaning a tax cut, especially among the groups (corporations and the wealthy) that are currently paying the highest amount in taxes will cause the opposite effect that Trump states it will.

Another risk that our country could run into through the tax cut is the national deficit. As I stated earlier, it makes sense that when the economy is nearing the peak of an expansion, taxes should be raised and government spending should be cut to pay off the debt and create a surplus that will be helpful when the country hits the next recession. Trump’s recent increase in military spending and, he hopes, his much-discussed border wall, in addition to the tax cut, are essentially the complete reverse of what the economy needs. Economists estimate that the new tax plan will increase the deficit from anywhere between $1-1.7 trillion over the next ten years. When Barack Obama took over office, the deficit amounted to nearly 10 percent of the total GDP (gross domestic product) in the US. By 2015, he had gotten it back to around 2 percent, which is better than the national average (3.1% since 1966). Now, that deficit is primed to go right back in the direction it came from.

Finally, Trump runs the risk of completely destroying the lower and middle classes. While at first, his plan provides tax cuts for all, the tax cuts for families that bring in below $30,000 a year will disappear after 2021, and in 2023, families making between $30,000-$40,000 will suffer the same fate. Because corporations and small businesses are receiving a tax cut, they will have more money to spend, but without added demand (because the middle and lower class people don’t have extra money), they won’t spend their money on creating supply. This could cause a good ol’ liquidity trap, as corporations will expect a drop in aggregate demand, making that new money they possess because of the tax cut worth less over time.

All in all, while supporters of Trump credit the current upswing in the economy to him and him only, it was Obama’s work in reality. The country has been working on Obama’s tax plan since Trump has taken office, which explains the continued growth. However, if the supporters of Trump believe the growth will continue, they’re dead wrong. The economy shouldn’t be a partisan issue, but it sure looks like it’s becoming one. If you aren’t upper class, or you’re heading to college in a few years (tuition for graduate students is now considered taxable income, which is interesting considering you’re actually giving that money to someone else), you probably won’t be happy with your financial situation in the coming years.

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