Donald Trump laid out a sweeping economic plan to “jump-start America” by cutting taxes and regulations to spur business growth, job creation, and wage increases. The Republican candidate delivered an hour-long policy speech Monday at the Detroit Economic club.
Trump’s new economic agenda is clearly intended to align more closely with fiscal conservatives like House Speaker Paul Ryan and other GOP leaders. The plan aims to limit government overreach and its chilling effect on growth, productivity and prosperity in the private sector.
The U.S. economy never fully recovered from the Great Recession of 2007; GDP growth remains a sluggish 2.2 percent. And while the unemployment rate has fallen below 5 percent, Trump pointed out that 94 million Americans are out of the workforce – the lowest labor force participation rate in four decades.
I read the entire 3,666-word transcript so you don’t have to. Here’s my take on the Trump’s “America First Economic Plan, with a focus on the potential benefits to entrepreneurs and small businesses.
Today’s tax code is 70,000 pages and full of loopholes. Trumps says that the average American worker pays 31.5 percent of wages in federal income and payroll taxes. And at 35 percent, the U.S. has the highest corporate tax rate among industrialized nations. The Donald aims to fix all that.
While falling short of a simple flat tax, the new plan features a simplified tax structure with three brackets (down from seven) for individuals: 12, 25, and 33 percent. To encourage multinational companies to invest in America, the plan slashes the corporate tax rate to 15 percent.
Under Trump’s plan, unincorporated businesses would benefit from the same lower 15 percent rate as corporations, instead of reporting business income on their individual returns, as they do today. That would amount to a big break for most small business owners, entrepreneurs, and perhaps solopreneurs, as well. It would also allow for immediate write-offs of new investments.
Meanwhile, multinational corporations based in the U.S. have a whopping $2.1 trillion parked overseas. The new plan will offer companies a one-time 10 percent repatriation tax rate to bring offshore capital back home and spark reinvestment in U.S. equities, facilities and jobs.
Lastly, Trump wants to eliminate the estate tax, provide more tax deductions for child-care costs and end the carried interest tax loophole that allows Wall Street hedge fund and other investment partners to treat income as capital gains. Getting rid of the "death" tax (estates of more than $5.45 million are required to pay federal estate tax) will allow families to pass more money to their heirs -- money that can be used as startup capital.
Federal regulations are an enormous drag on business creation and growth. Last year alone, 3,378 new rules were finalized and another 2,334 proposed, totaling 81,405 pages, according to the Competitive Enterprise Institute, a libertarian think tank. Compliance drains small business capital, reduces profits and impedes revenue growth.
Trump is calling for a temporary moratorium on all new federal regulations to give businesses a break from the constant onslaught of new rules. He also wants every federal agency to scrutinize and eliminate unnecessary and job-killing regulations.
While he makes no specific mention of Sarbanes-Oxley, that legislation in particular has contributed to a dramatic long-term decline in the number of IPOs and publicly traded companies. Similarly, the cost of Dodd-Frank compliance has made it harder for smaller institutions to compete in the financial sector.
Trump’s plan also calls for reform of the Environmental Protection Agency (EPA) -- the most notorious over-regulator of the executive branch -- as well as the Obama Administration’s clean energy policies that limit expansion of certain forms of energy. By lifting restrictions on all sources of American energy production, he intends to drive energy independence, growth and job creation.
It comes as no surprise that Trump plans to repeal and replace the Affordable Care Act. He says that alone will save 2 million American jobs by removing the incentive for companies to replace full-time workers with part-time or contract labor to avoid paying exorbitant healthcare premiums that small businesses simply can’t afford.
The most controversial and nebulous of his economic policy platform involves international trade deals, which Trump says contribute significantly to our growing trade deficit, offshoring and intellectual property theft. He seems intent on renegotiating the North American Free Trade Agreement (NAFTA) to get more favorable terms from Mexico and Canada.
He also criticized the 2011 trade accord with South Korea and plans to withdraw from the 12-nation Trans-Pacific Partnership currently being negotiated by the Obama Administration. Lastly, Trump vows to get tough with China on currency manipulation, export subsidies and intellectual property enforcement. It bears mentioning that more than half of America’s $800 billion trade deficit is with China.
I’m not entirely sure of the impact of his trade policy, but Trump’s plans for tax and regulatory reform should benefit entrepreneurs, small business owners and corporations alike. It would sure be nice to have a business-friendly face in the White House for a change.