At a town hall event this week at a Bronx barbershop, former President Donald Trump was asked about the possibility of repealing the federal income tax.
From the way he answers, how Trump understands fiscal policy and what he doesn’t understand, even after nine years on the presidential campaign trail and sitting in the White House. Something important has become clear.
This is a somewhat random question for a presidential candidate, given that Trump has spent months promising to exempt many types of income from federal income taxes, including tips and Social Security payments. , it would be wise to ask this question. So why not eliminate the federal income tax entirely?
Mr. Trump seemed to take the idea at least semi-seriously. President Trump: “It used to be…the 1890s” said,”[the United States] All duties were due and there was no income tax. ”
Trump continued: “There are people who are dying. They pay taxes and they don’t have the money to pay their taxes.”
In this regard, President Trump is on the right track. Income tax is dangerous! It is a real burden that discourages work and unfairly deprives productive Americans of their income. And Mr. Trump is correct in pointing out that there was a time when this country did not have an income tax. Although a temporary tax was imposed during the Civil War, the income tax as we know it today was created after the passage of the 16th Amendment in 1913.
This is not the first time President Trump has cited the 1890s as a model for American fiscal policy. new york times pointed out on thursdayAnd some of the nationalist conservatives who support his campaign seem to think the same way. Good feeling A time when tariffs were the primary means of funding the (much smaller) federal government.
However, fiscal policy has two aspects: revenue and expenditure. Of the two, the expenditure side, i.e. “.real taxAs Milton Friedman famously said, ” is more important.
Put another way: If you want to fund the government at 1890s levels, you need to use 1890s methods to plan to reduce spending to 1890s levels as well.
That’s not possible now. Average federal spending in the 1890s, measured as a percentage of the size of the nation’s economy Approximately 3% of gross domestic product (GDP). Government spending in 2024 will be exceeded 24% of GDP—More than $6.8 trillion.
Currently, America’s GDP is Approximately $29 trillion. Cutting spending to 1890s levels would leave the government with about $900 billion to spend next year. Context: interest on government bonds It will cost $892 billion in fiscal year 2024..
That would leave less than $10 billion available for everything else. Goodbye, Social Security (costing $1.4 trillion this year). Goodbye to the military. Goodbye.
To be sure, Mr. Trump wasn’t really thinking about returning government to 1890s standards. In fact, he never seriously thought about cutting spending at all. He has added $8 trillion to the debt in his four years in office, the last billions of which can only be attributed to the coronavirus pandemic.
President Trump needs a spending cut plan. It’s real. Yes, unofficial campaign agent Elon Musk recently took up the cause, saying that the second Trump administrationsignificantly reduce spendingIt sounds more like a Trumpified version of the ever-present campaign to root out “waste, fraud, and abuse” than an actual plan, but sure, do it. that.
For Trump and his fellow Republicans, the goal is not the 1890s, but rather the 1990s (at least as a starting point). Toward the end of that decade, government spending declined during the most recent period of balanced federal budgets. less than 18 percent of GDP. Even approaching that level today would require a major reversal in government behavior.
Unfortunately, that’s not what President Trump is promising. Indeed, independent analyzes of his policies (not all of which are clearly defined) indicate that he will increase the budget deficit.
There is a wide disparity between the amount of government that Americans receive and the amount they currently pay. Closing this gap should be a priority for the next administration and Congress. Any talk of tax cuts should not be taken seriously until an actual plan is developed to rein in spending.
