Trump’s Tax Plan Would Save Me Millions of Dollars. Here’s Why I’m Against It
As Congress gets ready to consider Trump’s tax plan, I have no doubt that a group of junior staffers are huddled in the basement of the Rayburn House Office Building, whiteboarding potential names for the House bill.
You see, a bill’s name means everything in the early messaging days. Who could forget Republicans' efforts to rebrand the ACA as “Obamacare”? Or Democrats renaming young, undocumented workers as “Dreamers”?
Let me save everyone some time: Let’s just call it the Mar-a-Lago Supplemental Assistance Act.
On paper, Trump’s tax plan looks good for someone like me -- the founder of a fast-growing, private media company, whose team brought in $20 million in revenue last year and is on track to double. Frankly, I stand to save a LOT of money.
But I’m against it.
Why would I be against a plan that would pad my own personal bank account and save my company money? Let me explain.
Trump-tax-tic Tax Cuts for Millionaires and Billionaires
Trump proposes we reduce the corporate tax rate (currently 35%) to 15% and have the same pass-through rate for individuals who own a business. His plan would also get rid of a 3.8% tax called the Net Investment Income Tax, which applies to citizens whose net investment income is over six figures.
In short, it’s a huge tax cut for the rich, a huge tax cut for Trump... and a huge tax cut for me.
Based on the little we know about Trump’s plan so far, here’s why I can’t support it:
1. It won’t change how much I invest in my business.
While Trump says this plan will prompt business growth, taxes are the last thing I consider when it comes to growing my company.
Tax cuts might help me save more money, but they won’t change my strategic goals or plans for the upcoming year. We base business decisions on profit margins, not after-tax income. Besides, the tax code is already set up to encourage businesses to reinvest profits before they actually become profits.
In Sept. 2012, the Congressional Research Service, a nonpartisan group that works for Congress, released a report called “Taxes and the Economy: An Economic Analysis of the Top Tax Rates Since 1945.” The researchers concluded that over a 65-year period, “the reduction in the top tax rates appears to be uncorrelated with saving, investment, and productivity growth.” Further, these reductions seem to be “associated with the increasing concentration of income at the top of the income distribution.”
In other words, cut taxes for the rich, and the rich get richer.
2. It will blow a hole in the deficit.
Back in September, the right-leaning Tax Foundation estimated that, even after accounting for growth, the Trump campaign plan would put a $2.6 to $3.9 trillion hole in the budget. Now, under the new plan, The New York Times estimates it could be as high as $7 trillion.
This will likely lead to huge deficits and big interest payments that future generations will have to pay for well after the gold drapes are replaced in the Oval office.
As the founder of a personal finance website -- and someone who struggled with credit card debt in the past -- I know all too well the harms of spending money now without a plan to pay for it in the future.
3. Those deficits will be used as an excuse to cut back on important investments.
We’ve seen this show before. In 2001, Congress passed a trillion dollar tax cut that largely benefited the wealthy. When that tax cut failed to pay to for itself as promised, we turned 2001’s $158 billion surplus into major deficits that exploded over the next decade, even before the financial crisis.
In 2011, those deficits led to fiscal hawks and the Tea Party demanding that we slash government spending or they would default on the nation’s credit card. They won.
The cuts have been devastating to our country’s infrastructure, medical research and education. On a personal level, they also hurt businesses like mine, which need the federal government to continue investing in these areas.
Take education. Our country has an estimated five million unfilled jobs, many of them technical that require highly-skilled workers like developers and engineers. How will the businesses of tomorrow find the talent we need to continue growing if we aren’t making necessary investments today?
I Don’t Enjoy Paying Taxes Either
Taxes are part of the American privilege. None of us enjoy paying them -- believe me, my accountant knows to bring scotch to our check-writing meeting next year. But those of us in a position to pay the most should do so.
We’re also often the people who have benefited the most from government.
I was lucky to grow up in the U.S. and start a business here. I received 12 years of a fantastic public education for free, and I’ve leveraged our nation’s business laws to protect my company’s copyrights and trademarks. Those are just a couple of examples of how I’ve benefited from government, and neither would have happened without a functioning, well-funded treasury.
So yes, I’d save millions of dollars under Trump’s proposal. But nothing about this plan feels right -- no matter what they decide to call it.
Kyle Taylor is the founder and CEO of The Penny Hoarder, one of the largest personal finance websites with 15 million-plus monthly readers. In 2016, the Inc. 5000 ranked The Penny Hoarder the 32nd fastest-growing private company and the №1 fastest-growing private media company in the United States. You can read his article “5 Things Managing Political Campaigns Taught Me About Being a CEO.”
Image credit: Sharon Steinmann