Trump’s ‘major’ tax overhaul a major disappointment

Libertarians call for corresponding spending cuts to truly benefit Americans

All persons are entitled to keep the fruits of their labor. We call for the repeal of the income tax, the abolishment of the Internal Revenue Service and all federal programs and services not required under the U.S. Constitution.

“President Trump’s proposal for a major tax overhaul addresses only one half of America’s economic problems,” said Libertarian National Committee Chair Nicholas Sarwark. “Trump’s proposal to cut the federal corporate income tax from 35 percent to 15 percent is merely a first step. American corporate taxes are substantially higher than those of most other industrialized nations. That incentivizes American corporations to stash cash from foreign earnings overseas, rather than bring it back to be spent or invested in the United States. Any tax cut is a good thing, but a tax cut without a corresponding federal spending cut is essentially meaningless to average Americans.”

Referring to research by Mercatus Senior Research Fellow Veronique de Rugy, Sarwark pointed out that “43 percent of federal spending is borrowed. Nearly 70 percent of federal spending is in so-called mandatory spending (Social Security and other pensions, health care, interest on the debt, and various income transfer programs). That means the government is already borrowing before it even thinks about discretionary spending (defense, courts, regulatory agencies, roads, etc.). That’s all borrowed money.”

Sarwark continued, “Whether the federal government borrows the money it spends or extracts it from the people through taxation makes little difference. In either case, it is money that is no longer available to be spent or voluntarily invested in the economy. Instead, it is spent far less productively, on wars, counterproductive bureaucracies, and the transfer of earnings from people who work to those who don’t.”

The congressional Republicans’ tax plan makes even less sense than Trump’s half-measure proposal. Speaker Paul Ryan proposes coupling a corporate tax rate cut with a border adjustment tax, which would effectively make Americans pay substantially higher prices at retail.

Of course, Democrats led by Senate Minority Leader Chuck Schumer don’t want any tax cuts at all, engaging in class warfare by saying that the cuts would benefit only the top 1 percent of income earners.

Americans spend more on federal, state, and local taxes than they do on food and clothing combined, according to a Bureau of Labor Statistics report released last week. People get their money’s worth in food and clothing. They don’t get it in government services.

The Libertarian solution is to eliminate the 43 percent of federal spending that is borrowed, with these common-sense, simple measures: limit defense spending to defense, eliminate counterproductive regulatory bureaucracies, and phase the government out of the health care and pension businesses. Then cut spending even more, with corresponding cuts in taxes.