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Trejos: GOP tax plan will grow U.S. economy, help working class

Jose Trejos, Columnist

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After months of internal debate, the GOP finally released the main points of its tax plan, its major legislative initiative before the 2018 election cycle. While many crucial details are still under debate, the tax plan has greatly exceeded my expectations and promises to drive significant economic growth. If Democrats are serious about helping the working and middle classes, they should be supporting tax reform instead of blindly working to undermine Republicans.

The primary feature of the Republican tax plan is a large cut to corporate taxes, better understood in my opinion as simply giving the United States a normal tax code. For years, the U.S. has had one of the highest corporate tax rates in the developed world — a staggering 35 percent (39 percent counting the average state tax) compared to a worldwide average of 23 percent, according to a study by the Tax Foundation. The U.S. is also one of only a handful of countries to tax companies on their worldwide profits, which has driven several major companies to move internationally over the past decade. The tax plan would address both of these concerns, lowering the corporate rate to 20 percent and moving to a territorial system that doesn’t tax companies on international profits, which would make the U.S. tax system more competitive with other developed countries.

According to the Organization for Economic Cooperation and Development, corporate taxes are the most economically harmful form of tax, a likely reason why so many countries have lowered them in recent decades. This takes its toll on the economy, most visibly in the many corporations fleeing the U.S. each year for countries with competitive tax systems like Ireland, and less visibly in the countless investments corporations choose not to make daily due to the heavy burden of taxation. This doesn’t just affect the wealthy, but restricts investment — and thus the jobs and raises that corporations can offer, severely hurting the working class in the long run.

This is a key point I hope even some progressives can agree on: even if we decide to have a government that imposes huge taxes to pay for generous social programs, it is important that we collect taxes in a way that hurts the economy as little as possible. Progressives who seek to make the U.S. more like Europe should note that these European countries — such as Norway, Denmark and Sweden — have long decided corporate taxes are a harmful way to pay for large social programs. It’s a far cry from trickle-down economics to suggest progressives should focus on raising taxes on the rich rather than on corporations.

Aside from business tax reform, the Republican tax plan takes several steps to make the tax code fairer and more generous for the working class. The biggest change the tax plan makes for the poor is a nearly-doubled standard deduction, which means that couples earning less than $24,000 a year, the “working poor,” will pay no income taxes. The plan will also likely be paid for largely by cutting tax benefits for the rich including the State and Local Tax Deduction, and explicitly leaves room to set a higher tax rate for the wealthy upon further negotiation. While this is still a painfully vague aspect of the framework, Republicans seem determined to follow through on Trump’s promise to cut taxes for the middle and working classes overall to pay for the tax plan, rather than provide tax cuts for the rich.

Democrats will probably attack the tax plan using simplistic, populist charges, accusing it of being largely a tax cut for the rich. Regardless of one’s political views, however, this is simply untrue: Combining benefits to simplify taxes, moving to a territorial tax system and eliminating tax exemptions demonstrate a move toward a fair and competitive tax code. The tax reform plan is definitely not perfect — I myself hoped to see Republicans implement bolder pro-growth policies like permanent full expensing, and tackle the more useless tax giveaways like the American Opportunity Tax Credit. It is, however, a clear improvement over the current system, with tangible benefits for Americans throughout the socioeconomic ladder.

Jose Trejos is a Weinberg junior. He can be contacted at josetrejos2019@u.northwestern.edu. If you would like to respond publicly to this column, send a Letter to the Editor to opinion@dailynorthwestern.com. The views expressed in this piece do not necessarily reflect the views of all staff members of The Daily Northwestern.

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