by Donald Trump
It’s unfair and wrong. It’s also bad economic policy. When taxes go up, what do people do? Many smart people shift their money into tax-free municipal bonds. And guess what? The government doesn’t get the money it thinks it’s going to get. If Obama knew more about economics he’d know about something called Hauser’s Law, named after W. Kurt Hauser, a chairman emeritus at the Hoover Institution at Stanford University. As Hauser explains, the top marginal personal tax rate for the last sixty years has swung wildly, ranging from as high as 92 percent in 1952–1953 all the way down to 28 percent in 1988–1990. Yet regardless of the tax rate, tax revenues as a percentage of GDP have stayed roughly the same, averaging just under 19 percent.18 That’s because when taxes get too painful, people simply move their money away from the federal government’s greedy hands and into tax-free havens. High tax rates don’t increase government revenues, all they do is take money out of the productive economy that creates jobs and lock it into less dynamic investments like bonds. Only a fool would advocate such a disastrous plan. But that’s precisely the path Barack Obama has pursued.
None of this should have come as a surprise to anyone who was paying attention in 2008. Remember Joe the Plumber? Then-candidate Barack Obama made his intentions crystal clear: “I believe that when you spread the wealth around, it’s good for everybody.” So we knew where this was heading all along, because it’s not government’s job to spread your money around. You spread it around yourself when you decide how you want to spend it, invest it, or donate it. Obama supports taxes because he believes government should decide more and you should decide less.
Based on their words and policies, Michelle and Barack Obama apparently believe that capitalism and entrepreneurship are bad. The way they see it, raising taxes is a way to punish people for having the audacity to work hard and get rich. As First Lady Michelle Obama put it in a speech in Ohio to a women’s group: “Don’t go into corporate America. You know, become teachers. Work for the community. Be social workers. Be a nurse.... Make that choice, as we did, to move out of the money-making industry into the helping industry.”19 Teachers and nurses are great, but to tell people that being in business is somehow illegitimate and not part of the “helping industry” is a horrible message to send to people. Especially young people interested in business and entrepreneurship. By her logic (if you can call it that), creating a company that creates tens of thousands of jobs and provides employees an honest way to feed their families and send their kids to college is somehow to engage in activity that is not part of the “helping industry.” But again, the Obamas telegraphed their anti-wealth message all along. As President Obama confessed, “I do think at a certain point you’ve made enough money,” as if it’s his or the government’s place to decide how hard you work and how much wealth and opportunity you create. It’s shameful and sad. It’s no wonder he’s turned America into a huge train wreck.
Time to Get Smart on Taxes
We need a tax system that is fair and smart—one that encourages growth, savings, and investment. It’s time to stop punishing hard work and entrepreneurship. Specifically, we need to do five things. First, the death tax needs to die. It’s immoral for the government to tax you after you’re dead, to seize a portion of your money and property that you spent your life building up, and on which you already paid taxes. Your children deserve your estate, not the federal government. President George W. Bush eliminated the death tax (sometimes called the estate tax) for one year. But after 2010, under Obama, it rose from the grave. Now estates, above an exempted level, will be taxed at a rate up to 35 percent. “It doesn’t seem to matter that the vast majority of the money in an estate was already taxed when the money was earned,” reports the Wall Street Journal. “This ignores that much of the long-term saving and small business investment in America is motivated by the ability to pass on wealth to the next generation.... What all this means is that the higher the estate tax, the lower the incentive to reinvest in family businesses.”20
A study by former Congressional Budget Office director Douglas Holtz-Eakin found that moving the death tax from 0 percent to 45 percent (the amount Obama wants) is a proven jobs killer, because it will strip $1.6 trillion of small business capital out of the hands of job creators. That, says Holtz-Eakin, means a loss of 1.5 million new jobs. How can we sit back and let that happen at a time when 25 million Americans can’t find enough work to take care of their families?21 The death tax only raises a tiny 1 percent of all federal revenue.22 Plus, heirs already have to pay capital gains on the assets they acquire from any estate. This president is willing to sacrifice 1.5 million jobs just for the pleasure of “sticking it to rich people.” That’s simply wrong.
Obama says that “when we think about tax reform we should be thinking about fairness. What’s fair?”23 Well, I’ll tell you what’s not fair, Mr. President: killing 1.5 million jobs and strangling economic growth just so you can feel warm and fuzzy about taking money from family businesses and spreading it around as you and your bureaucrats see fit. If we repeal the death tax, we get 1.5 million jobs, boost small business capital by more than $1.6 trillion, increase payrolls by 2.6 percent, improve the probability of businesses hiring new employees by 8.6 percent, and expand investment by 3 percent.24 It’s a no-brainer. It’s time to kill the death tax once and for all. More than a million jobs depend on it.
Second, we need to lower tax rates on capital gains and dividends—two more taxes that are proven jobs and investment killers. Naturally, President Obama wants to do the opposite. He wants to raise the capital gains tax rate from 15 percent to 20 percent.25 He also wants to jack up the dividend tax rate by the same amount. Again, in Obama’s world, it’s all about punishing success and redistributing wealth. As economist J. D. Foster pointed out, “Obama was very clear in his campaign debate with then-Senator Clinton that raising revenues was not his primary reason for suggesting the capital gains tax hike.” Even the president’s own budget numbers show that a miniscule 0.01 percentage point drop in annual economic growth—which is inevitable if Obama’s tax policies are followed—would totally wipe out the money he hopes to cream off with his capital gains tax increase. J. D. Foster concludes, “The President should set aside his ideological preferences and press Congress to maintain the current 15 percent tax rates for capital gains and dividend tax rates until the economy reaches full employment.”26 To raise these tax rates now (or ever) is shortsighted and economically foolish.
Capitalism requires capital. When government robs capital from investors, it takes away the money that creates jobs—real private sector jobs that contribute to the health of our economy. For a guy who claims that creating jobs is the first thing he thinks about when he wakes up and the last thing he thinks about before he goes to sleep, you would think he would know better. But he doesn’t. That’s why we need a new president, one who will keep capital gains rates low.
The third thing we need to do is lower the U.S. corporate tax rate from 39 percent to zero. As I stated, America’s corporate tax rate is the second highest on the planet. The international average is 26 percent. How can we expect companies to hire American workers and locate their businesses in America when our government taxes them at exorbitant rates for doing so? That’s crazy. I want to encourage American companies to stay here and hire American workers, and I want foreign companies to relocate their businesses to the United States and create jobs here. We are the greatest country on planet earth—the world’s companies want to be here. A zero percent corporate tax would create an unprecedented jobs boom. Millions of jobs would materialize. This isn’t brain surgery. You cut the corporate tax and companies stay in America or relocate to America, and that produces jobs. Who doesn’t understand that?
The problem is that we have a president who is more concerned with pursuing some sort of bizarre ideological mission that flies in the face of America’s free-market tradition. Look, we don’t have time to play games. Our people are hurting badly. Here’s my message to Obam
a: America is a capitalist country. Get over it and get on with it! Unleash job creators and we will put Americans back to work in big numbers. Cut the corporate tax and create millions of new jobs while stimulating our limping economy.
Fourth, it’s time to get tough on those who outsource jobs overseas and reward companies who stay loyal to America. If an American company outsources its work, they get hit with a 20 percent tax. For those companies who made the mistake of sending their businesses overseas but have seen the light and are ready to come home and bring jobs with them, they pay zero tax. Bottom line: hire American workers and you win. Send jobs overseas, and you may be fine, but you will pay a tax. Also, I want foreign countries to finally start forking over cash in order to have access to our markets. So here’s the deal: any foreign country shipping goods into the United States pays a 20 percent tax. If they want a piece of the American market, they’re going to pay for it. No more free admission into the biggest show in town—and that especially includes China.
The fifth and final part of my tax plan involves reforming the income tax. The government confiscates way too much of your paycheck. The tax code is also a very, very complicated system that forces Americans to waste 6.1 billion hours a year trying to figure it out.27 Americans also waste billions hiring accountants to try and make sense out of the tax code. You can hire 100 accountants to do your taxes and they’ll all come up with different numbers. What does that tell you? It tells me that it’s time we restore simplicity and sanity to the income tax. Here’s my income tax plan:• Up to $30,000, you pay 1 percent
• From $30,000 to $100,000, you pay 5 percent
• From $100,000 to $1 million, you pay 10 percent
• On $1 million or above, you pay 15 percent
It’s clear and fair. Best of all, it can be filled out on the back of a postcard and will save Americans big bucks on accountants and massive amounts of time wasted attempting to decipher the tax code.
Our country is hungry for real tax reform. That’s why we should implement the 1-5-10-15 income tax plan. Let China, OPEC, and others pay the tax, not us. It’s about time . . . and they have all the money.
I believe the government already takes enough of your hard-earned money. Obama thinks the opposite. If we want jobs in America, we need to enact my five-part tax policy: kill the death tax, lower the tax rates on capital gains and dividends, eliminate corporate taxes in order to create more American jobs, mandate a 15 percent tax for outsourcing jobs and a 20 percent tax for importing goods, and enact the 1-5-10-15 income tax plan.
Government needs to stop pick-pocketing your wallet. Every time it does, it slows growth and kills jobs. It’s also immoral. We need to get back to doing what we know works. President Reagan had it right: lower taxes produce more freedom and opportunity for all. Everyone knows that—except in Washington. It’s time we send the politicians a big message loud and clear. As Senator Everett Dirksen once said, “When they feel the heat they’ll see the light.” It’s time we turn up the heat.
FIVE
A GOVERNMENT WE CAN AFFORD
A government big enough to give you everything you want is a government big enough to take from you everything you have.1
—President Gerald Ford
Every day, your government takes in $6 billion in revenue and spends $10 billion. That means every day the federal government has to borrow $4 billion more than it has.2
To state the obvious, if any business operated the way the government does, it would go under. But in the absurd world of Washington, politicians just kick the can down the road and shrug. There’s just one problem: the can has finally hit a $15 trillion debt wall. For the first time since the founding of the Republic, we’ve lost our AAA credit rating, and now even our enemy China is having second thoughts about lending us money to bankroll Barack Obama’s endless spending spree.
Americans understand that the U.S. has a spending problem, not a revenue problem. In September 2011, Gallup asked Americans how much money they think the federal government wastes. On average, citizens put the figure at 51 cents out of every dollar. That’s probably being too kind.
We need more grown-ups in Washington, people who will shoot straight and level with the American people about our nation’s top budget busters. The biggest slices of the budgetary pie are eaten up by Social Security, Medicare, and Medicaid. Social Security makes up 20 percent of the budget ($707 billion). Medicare and Federal Medicaid account for 22 percent of the budget ($724 billion). As everyone knows, health-care costs are skyrocketing, and Medicaid has massively expanded its role in the health-care system. When Medicaid was created in 1965, only one in fifty citizens used the program. Today, it’s one in six Americans.
Save Social Security and Medicaid
Social Security faces a similar problem. Soon there will be more people inside the cart than there are pulling the cart. Right now, 53 million people collect Social Security benefits that average $1,067 a month. In seventy-five years, that number will jump to 122 million, roughly one out of every four citizens.3 That’s why, with 77 million baby boomers set to retire and begin collecting benefits, these two programs—a combined 42 percent of the U.S. budget—are in danger of becoming insolvent. We can’t let that happen.
Now I know there are some Republicans who would be just fine with allowing these programs to wither and die on the vine. The way they see it, Social Security and Medicare are wasteful “entitlement programs.” But people who think this way need to rethink their position. It’s not unreasonable for people who paid into a system for decades to expect to get their money’s worth—that’s not an “entitlement,” that’s honoring a deal. We as a society must also make an ironclad commitment to providing a safety net for those who can’t make one for themselves. At least that was President Reagan’s stance. On April 20, 1983, Reagan signed a bill to preserve Social Security. At that bill signing, the president said words every Republican should heed:This bill demonstrates for all time our nation’s ironclad commitment to Social Security. It assures the elderly that America will always keep the promises made in troubled times a half a century ago. It assures those who are still working that they, too, have a pact with the future. From this day forward, they have one pledge that they will get their fair share of benefits when they retire.4
President Reagan had it right: Social Security is here to stay. To be sure, we must reform it, root out the fraud, make it more efficient, and ensure that the program is solvent beyond the Baby Boomers. But to listen to some Republicans vilify a system that’s been around for over seventy-six years and that taxpayers have paid into for decades makes me think they should go back and watch President Reagan’s speech again.
Same goes for Medicare. Again, people have lived up to their end of the bargain and paid into the program in good faith. Of course they believe they’re “entitled” to receive the benefits they paid for—they are!
The question is, how do we pay for Medicare, Medicaid, and Social Security when costs are ballooning and deficits are soaring? Here again, both sides fumble the ball badly. Democrats pretend that the answer is raising taxes. But anyone with a brain knows all that will do is kill economic growth. That’s the exact opposite of what needs to happen. Economic growth is the secret to making the entire pie grow larger. When that happens, millions of new workers will become new taxpayers and revenues will rise. As Senator Marco Rubio of Florida put it: “Let’s stop talking about new taxes and start talking about creating new taxpayers, which basically means jobs.”5 And that’s what economic growth will do.
But many Republicans also miss the mark. They pretend we can just nibble around the edges by eliminating waste, fraud, and abuse and somehow magically make these programs solvent and pay off our massive $15 trillion debt. Neither side is being totally honest.
Our country doesn’t need cowardice, it needs courage. Here’s the first part of the solution: our leaders need to get tough with the big players like China and OPEC that are ripping us off so we
can recapture hundreds of billions of dollars to pay our bills, take care of our people, and get us on a path toward serious debt reduction. We must take care of our own people—we must make our country strong and rich again so that Social Security, Medicare, and Medicaid will no longer be thought of as a problem. We must save these programs through strength, power, and wealth.
As I explained earlier, China takes us for $300 billion a year, and OPEC is even worse. Washington is so busy squabbling over peanuts that they’re completely missing the mountains of money staring them in the face. Obama and Republicans spent weeks bickering over $60 billion of spending cuts in the president’s budget. Excuse me, but we have a $15 trillion debt. We need to get serious and get tough with the big rip-off artists who abuse this country regularly. If we do that first, the remaining cuts and reforms we need to make will be substantially smaller, more manageable, and much less painful.
Stop and think about it: even just leveling the playing field with China for a decade would be the equivalent of one-fifth of our national debt (and would have been one-third of our debt had we not elected the community organizer). You add in several hundred billion a year from putting OPEC in line, hundreds of billions from negotiating properly with the many other countries that are ripping us off, root out the hundreds of billions of incredible fraud that occur every year (more on that later), and now we have a debt problem America can manage—one where we can attack waste and abuse and whittle down the remaining debt to get our fiscal house in order. So that’s the first step: bringing home the hundreds of billions of dollars that the petro thugs at OPEC and our enemy China steal from us every single year—and then go after all of the others.