President Trump’s Tax-Reform Victory Lap

January 30, 2018 Uhler | Ferrara

President Trump claimed victory for his economic policies at the World Economic Forum in Davos, Switzerland.

He told the assembled world business leaders: “The stock market is smashing one record after another, adding more than $7 trillion in new wealth since my election. Consumer confidence, business confidence, and manufacturing confidence are the highest they have been in many decades. Since my election we’ve created 2.4 million jobs. … Small business optimism is at an all-time high. New unemployment claims are near the lowest we’ve seen in almost half a century. African-American unemployment reached the lowest rate ever recorded in the United States and so has unemployment among Hispanic-Americans.”

Indeed, the 31% increase in the Dow in Trump’s first year was the best since FDR. This year, the S&P 500 broke a 54-year record for the number of all-time highs scored in January. The IMF forecast nearly 4% economic growth worldwide for 2018 and 2019, crediting the global spillover effects of America’s boom. Jobless claims remained near their lowest level in 45 years for the second week in a row in January.Trump explained the policies that achieved these results:

“(W)e’ve just enacted the most significant tax cuts and reform in American history. We’ve massively cut taxes for the middle class and small businesses to let working families keep more of their hard earned money. We’ve lowered our corporate tax rate from 35% all the way down to 21%. As a result, millions of workers have received tax cut bonuses … in amounts as large as $3,000. The tax cut bill is expected to raise the average American’s household income by as much as $4,000.”

Trump also led “the most extensive regulatory reduction ever conceived. … I pledged to eliminate two unnecessary regulations for every one new regulation. (But) instead … we have cut 22 burdensome regulations for every new rule.”

Net result: “We are freeing our businesses and workers so they can thrive and flourish as never before. … We are creating an environment that attracts capital, invites investment, and rewards production.”

That investment is what creates new jobs and restores rising wages.

Trump reported at Davos, “The world’s largest company, Apple, announced it plans to bring $245 billion in overseas profits home to America. Their total investment into the United States economy will be more than $350 billion over the next five years. Now is the perfect time to bring your business, your jobs, and your investments to the United States.”

Trump concluded in Davos, “The world is witnessing the resurgence of a strong and prosperous America. I’m here to deliver a simple message. There has never been a better time to hire, to build, to invest and to grow in the United States.”

The good news for America’s workers and middle class continued even while Trump was trumpeting his case at Davos. The latest count of American companies announcing wage increases, bonuses, and new investment in America is now 282, in a running total kept by Grover Norquist and Americans for Tax Reform, among the collaborators in our tax reform truth squad.

Last Friday, Fed Ex announced $1.5 billion in new investment in its U.S. facilities, plus another $200 million in wage increases primarily for hourly workers, with another $1.5 billion for employee pensions. J.P. Morgan proclaimed $20 billion in new investment over 5 years, increasing wages by at least 20% for lower paid employees, opening 400 new branches across America, and hiring at least 3,000 new employees.

Starbucks declared wage increases and stock grants for 150,000 employees, and Disney announced $1,000 bonuses to 125,000 employees. Home Depot also pronounced $1,000 bonuses for its employees.

None of this is correctly described as companies passing along the tax cuts to their workers. The economics is more accurately described as companies and workers responding to incentives provided by the lower tax rates, or deductions for “expensing” of investment, or the new rules for taxation and repatriation of overseas earnings and investment. The lower rates and other new rules provide powerful incentives for increasing investment in America for plant and equipment, starting or expanding businesses, and creating new jobs, which increases demand for labor, and hence wages.

The end result is increased economic growth, and broad prosperity, the “rising tide that lifts all boats,” in President Kennedy’s phrase, the last Democrat who understood our capitalist economy. Today’s Che Guevara Democrats, by sharp contrast, provided not one vote for tax reform, and lied to us about the tax cuts, jobs, and wage increases for the middle class involved in it.

  • Uhler is founder and chairman of the National Tax Limitation Committee and Foundation, which sponsors the tax reform truth squad.
  • Ferrara, senior fellow at the Heartland Institute, served in the White House Office of Policy Development under President Reagan, and as Associate Deputy Attorney General of the United States under President George H.W. Bush.

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