Monday, April 10, 2017
Roubini : Trump tax cut plan will be as big a flop as failed healthcare reforms
President Donald Trump’s first major legislative goal – to “repeal and replace” the 2010 Affordable Care Act (“Obamacare”) – has already imploded, owing to Trump and congressional Republicans’ naivety about the complexities of healthcare reform. Their attempt to replace an imperfect but popular law with a pseudo-reform that would deprive more than 24 million Americans of basic healthcare was bound to fail – or sink Republican members of Congress in the 2018 midterm elections if it had passed.
Now Trump and congressional Republicans are pursuing tax reform, starting with corporate taxes and then moving on to personal income taxes, as if this will be any easier. It won’t be, not least because the Republicans’ initial proposals would add trillions of dollars to budget deficits, and funnel more than 99% of the benefits to the top 1% of the income distribution.
A plan offered by Republicans in the House of Representatives to reduce the corporate tax rate from 35% to 15%, and to make up for the lost revenues with a border adjustment tax (BAT), is dead on arrival. The BAT does not have enough support even among Republicans, and it would violate World Trade Organisation rules. The Republicans’ proposed tax cuts would create a $2tn revenue shortfall over the next decade, and they cannot plug that hole with revenue savings from their healthcare reform plan or with the $1.2tn that could have been expected from a BAT.
© Project Syndicate
Nouriel Roubini is an American professor of Economics at New York University`s Stern School of Business and chairman of RGE Roubini Global Economics