Donald Trump pitches tax cuts as 'rocket fuel' for the US economy

Trump smiles during his address on tax reform.
Trump smiles during his address on tax reform.PHOTO: EPA-EFE

WASHINGTON (NYTIMES) - President Donald Trump took his push for deep tax cuts to a supportive audience of manufacturers on Friday (Sept 29), arguing that reducing levies on businesses will be "rocket fuel" to propel economic growth and ultimately translate to more jobs and better wages for American workers, as well.

Still seeking a major first-year legislative victory after the latest failure of his bid to repeal and replace his predecessor's health-care system, Trump sought to rally business support for his tax package even as special-interest lobbyists already have begun mobilising to save breaks and provisions threatened by the plan.

"Under my administration, the era of economic surrender is over and the rebirth of American industry is beginning," he said in a speech to the National Association of Manufacturers. "America is winning again, and America is being respected again."

Arguing that most manufacturers will see their tax rates fall to levels not seen in many years, Trump said, "it will be rocket fuel for our economy."

For their part, Democrats hammered away at the plan, contending that it offered little relief for the middle class and would mainly benefit the wealthy, including Trump himself, who by one analysis could save US$1 billion (S$1.3 billion).

A new video posted online by the Democratic National Committee summed up its side of the argument with the headline: "Trump's tax plan = US$1 billion for Trump, 'zero' for 1/3 of Americans."

The framework crafted by the administration with Republican lawmakers would lower the corporate tax rate to 20 per cent from 35 per cent and create a new 25 per cent rate for pass-through businesses such as partnerships and sole proprietorships that currently are taxed at the rate of their owners.

About 95 per cent of businesses in the United States are structured as pass-throughs, and they account for most of the corporate tax revenue paid to the government. Businesses would be allowed to deduct the full cost of new equipment in the first year rather than spread it out over time.

For individual taxpayers, the plan would collapse the tax brackets to three from seven, lowering rates for many while doubling the standard deduction and increasing the child tax credit.

It would eliminate the tax on estates larger than US$5.49 million for individuals and about US$11 million for couples, while cancelling the alternative minimum tax, which is meant to ensure that the wealthiest still pay but has increasingly affected middle-class taxpayers as well. To offset some of the cost, it would cancel deductions for state and local income taxes.

 
 

Trump said the net effect would be "a giant, beautiful, massive - the biggest ever in our country - tax cut" and called on business to press Congress to pass it.

"With your help and your voice, we will bring back our jobs, we will bring back our wealth, and for every citizen across this land we will bring back our great American dream," Trump told the audience of manufacturing executives gathered at a Washington hotel.

As he has done before, Trump exaggerated the economic progress made on his watch. He noted correctly that economic growth reached 3.1 per cent in the second quarter of the year, but then asserted that the United States had not seen such growth in "a very, very long time".

In fact, the economy was growing that fast as recently as the start of 2015 and, since 2009, every year but one saw at least one quarter with even higher growth.

But in addressing the manufacturers association, Trump was preaching to the choir. The group said a survey of its members found that most reported that a package of tax cuts would make them more likely to expand their business, hire more workers and increase wages and benefits.

The group's survey found that during the past nine months, 91 per cent felt optimistic about the outlook for their businesses, the highest three-quarter average in its 20-year history.

"Today's tax code lets other countries win, and our workers and our families are paying the price, and we have an obligation to speak out," said Jay Timmons, the association's president.

"It's time to go big, it's time to go bold - and manufacturers are grateful to have a president who agrees."