NCPA - National Center for Policy Analysis

Trump's Tax Plan

October 5, 2015

Yesterday, Donald J. Trump released details of a tax reform plan. This plan would reduce individual income tax rates, lowering the top rate from 39.6 percent to 25 percent and creating a large zero bracket. The plan would also reform the business tax code by reducing the income tax on all businesses to 15 percent and eliminate business tax expenditures, including deferral and interest deductions. In addition, the plan would eliminate the Estate Tax and the Alternative Minimum Tax.

The Trump tax plan would:

  • Cut taxes by $11.98 trillion over the next decade. However, the plan would end up reducing tax revenues by $10.14 trillion over the next decade when accounting for economic growth from increases in the supply of labor and capital.
  • Significantly reduce marginal tax rates and the cost of capital, which would lead to an 11 percent higher GDP over the long term provided that the tax cut could be appropriately financed.
  • Lead to a 29 percent larger capital stock, 6.5 percent higher wages, and 5.3 million more full-time equivalent jobs.
  • Cut taxes and lead to higher after-tax incomes for taxpayers at all levels of income.

The increased incentives to work and invest from this tax plan would increase the size of the economy by 11 percent over the long run. The plan would lead to 6.5 percent higher wages and a 29 percent larger capital stock. In addition, the reduction of marginal tax rates on individual income would increase incentives to work and result in 5.3 million full-time equivalent jobs. These changes in the incentives to work and invest would greatly increase the U.S. economy's size in the long run, leading to higher incomes for taxpayers at all income levels.

Source: Alan Cole, "Details and Analysis of Donald Trump's Tax Plan," Tax Foundation, September 29, 2015.

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