Later today the details of President Trump’s tax reduction and reform plan will be unveiled that are aimed at creating more economic growth and job creation but they could ultimately result in more federal debt and fiscal economic burden in the future.
President Trump has previously discussed lowering the corporate tax rate from 35 percent to 15 percent and offering middle class tax cuts; however, Democrats are already opposed to offering such a deep corporate tax cut and deficit hawks in the Republican party may also fail to endorse the new tax model down the road if it ever comes up for a vote in Congress.
Secretary of the Treasury Steve Mnuchin has claimed that higher economic growth caused from he tax cuts will offset the drop in federal revenues as a result of lowering tax rates but several fiscal economists have questioned that logic at a time when the U.S national debt is fast approaching 20 trillion and the baby boom generation is reaching retirement.
U.S. entitlement spending, which represents a large portion of U.S. federal spending, is already under pressure.
Mnuchin’s rosy projections about U.S. GDP growth jumping to 3 percent from the proposed Trump tax cuts with neutral revenues are by no means set in stone.
It is questionable whether corporations would have enough incentive to go on a hiring binge with their earned corporate tax savings in hand when the actual length of the tax cuts are expected to be short-term in terms of their scope and the tax savings gained could also be applied for other purposes beyond job creation.
One of the other floated tax overhaul plans includes providing a tax holiday of 10 percent for the trillions of untaxed corporate earnings that are parked overseas and remains subject to the current corporate tax rate.
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