Trump/Clinton Economic Plans Revisited, Extremely Different
1. Trump’s Economic & Tax Plan Looks a Lot Like Ronald Reagan’s
2. Clinton’s Economic & Tax Plan is a Lot Like Obama’s, But Worse
For the last several years, the economy has ranked #1 among the greatest concerns expressed by most Americans. And as we all know, the state of the economy has a huge bearing on the investment markets. With that in mind, let’s take a look today at the latest economic and tax proposals of the two presidential candidates, Hillary Clinton and Donald Trump.
Both candidates have made tweaks and changes to their economic and tax plans in recent weeks, and both have made more details available about how their plans should work. But even with the latest changes, both candidates’ plans are night-and-day different.
Trump’s Economic & Tax Plan Looks a Lot Like Ronald Reagan’s
As a way of getting into today’s discussion of Trump’s economic and tax plan, let’s briefly go back and look at President Ronald Reagan’s economic and tax plan which he unveiled in 1981 after taking office. There are a lot of similarities.
Early in his presidency, Ronald Reagan enacted historic tax cuts to save the economy from the high-unemployment, high-inflation left over from the 1970s. Reagan acknowledged many times that he was following in former President John Kennedy's footsteps. Many Americans don’t remember Kennedy’s tax cuts because they were enacted after his assassination.
Both presidents, Kennedy and Reagan, followed an economic growth model that emphasized tax cuts and policies that supported a strong US dollar. Both men also reached across the aisle and garnered strong bipartisan support for their plans. That was another day, of course.
Under Ronald Reagan, individual tax rates were slashed from 70% to 28%, corporate taxes were significantly reduced and numerous loopholes were closed. And the American economy grew mostly between 4% and 5% annually for years thereafter.
Earlier this month, Donald Trump went a long way toward joining the ranks of Kennedy and Reagan. Speaking at the Economic Club of New York on September 15, he delivered a bold, optimistic growth message that falls squarely inside the JFK-Reagan model. He said at onset:
“My economic plan rejects the cynicism that our labor force will keep declining, that our jobs will keep leaving and that our economy will never grow as it did once before.” In short, Trump’s plan was based on a vision of optimism rather than the status quo (Obama/Clinton).
Trump established a goal of 4% annual economic growth, which would double the stagnant rate of the past eight years. The centerpiece of his plan is a reduction in business tax rates for large and small firms to 15% from the current uncompetitive 35%-40%, the highest in the developed world.
High business taxes are the biggest obstacle to a return to rapid economic growth. Abundant research has shown that the best way to raise wages and create jobs is to slash business taxes. Within five years a business tax cut will pay for itself, and then some.
In addition, he proposes immediate expensing for corporate new investment. This move alone could spark a significant increase in business spending on plants, equipment, technology and of course new jobs.
Perhaps equally important, Trump proposes a one-time 10% repatriation tax rate to incentivize American firms operating overseas to bring an estimated $2.5 trillion of offshore profits home. This money could also be used almost immediately for new business investment and job creation. Together, these business tax proposals could really goose the economy.