Alfonse D'Amato

Trump must focus on tax reform

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Just five weeks in, President Trump has continued to deliver on many of his campaign promises. Last week he reassured the American public and two of our closest allies that our relationships with them would only grow stronger under his presidency. Trump and Japan’s prime minister, Shinzo Abe, affirmed their determination to build up the U.S.-Japan alliance. They discussed job growth in both countries and the need to sustain a strong global economy.

Trump then attempted to fix what became a tumultuous relationship with Israel during the Obama administration. Time and time again, former President Obama ignored the safety and needs of one of our closest allies. Trump reassured Israeli Prime Minister Benjamin Netanyahu that he no longer needs to fear that the U.S. does not have Israel’s best interests at heart. Both nations honor the same democratic beliefs, which are being brought back by President Trump and his administration after eight years of neglect.

Now that tax time is here, I believe it’s time for Trump to focus on another one of his campaign pillars — meaningful tax reform. He has promised some of America’s largest companies that they will soon benefit from significant cuts in both corporate taxes and regulations. He was quoted recently saying that he would cut regulation by 75 percent and get the corporate tax rate down from the current 35 percent to the 15 to 20 percent range.

Lawmakers on both sides of the aisle can agree that the current corporate tax system has had a detrimental effect on the economy. The tax code is counterproductive, hurts Americans and costs the government hundreds of billions of dollars in tax revenue that it should be receiving.

Trump warned those big companies that in order to participate in a less-regulated private sector, they would have to keep operations, and jobs, here on American soil. It is time for both sides to deliver.

A recent op-ed in The Hill, titled “Fix corporate taxes by tying them to American workers,” brilliantly examined a proposal that would tie the tax rate to companies’ employment of American workers. The article, authored by Michael Davis and Scott Shay, detailed the following ratio: U.S. employment costs (American employees’ wages and benefits) divided by revenues (companies’ profits from sales at home and abroad). For each decile above the median employment costs-to-revenues ratio, the tax rate would decrease by 4 percentage points.

I believe the positives of such a tax system would be tremendous. Individual income tax revenue would soar due to the fact that more Americans would be employed, and that extra money would be reinvested back into the economy, stimulating growth of our gross domestic product. This is something Trump and his team should look into immediately. This system would encourage small business formation and productive pro-employment taxation, and would create a real demand for American employees.

In terms of individual tax reform, Trump and the Republican caucus must work on passing middle class reforms sooner rather than later. Trump’s tax reform plan aims to reduce the number of tax brackets from seven to three and to lower the top marginal tax rate to 33 percent from 39.6 percent.

In addition, under Trump’s plan, personal exemptions ($4,000 as of 2015) would be eliminated, but the standard deduction would increase from $6,300 to $15,000 for single filers and from $12,600 to $30,000 for married couples.

To put Trump’s model in simple terms, for a worker earning $30,000 a year, the effective tax would be 27.81 percent lower than the current effective tax rate, which would translate into a saving of $694. These benefits would continue to accrue for individuals earning less than $180,000.

The middle class of this nation has been punished by over-taxation and over-regulation. If the president stays on track and continues to work on the economy, which was the biggest concern of American voters in November’s election, you will see his approval ratings rise.

Trump knows that fixing the economy is the biggest issue facing the country, and I believe we will see him push his Republican colleagues to get meaningful reform passed within the next few months. He has done a great job of delivering on his campaign promises thus far, and when it comes to our economy and meaningful tax reform, I believe he will deliver again.

Al D’Amato, a former U.S. senator from New York, is the founder of Park Strategies LLC, a public policy and business development firm. Comments about this column? ADAmato@liherald.com.