Trump tax plan would have wiped out national debt
by AccountingWEB on
Several years ago, real estate tycoon and potential candidate for president in 2012, Donald Trump, proposed a tax plan that would have wiped out the multi-trillion dollar national debt in one fell swoop, provided a tax cut to the middle class, and installed a safeguard to the Social Security system. The plan actually was proposed in 1999, before the 2000 elections, but is it still viable?
The Trump plan would inflict a one-time 14.25 percent tax on any citizen with net worth in excess of $10 million or more. The value of a personal residence would be excluded from the $10 million personal wealth calculation. The tax would be payable over a 10-year period.
Such a tax is estimated to raise $5.7 trillion. At the time of the original proposal, that amount of tax collection could have paid off the national debt, saved the country the $200 billion that it was paying in annual interest payments, and shored up the Social Security Trust Fund so that the incoming Baby Boomer generation would be covered without bankrupting the plan.
In addition, Trump's plan would repeal the federal inheritance tax. According to Trump, "The inheritance tax is a particularly lousy tax because it can often be a double tax. If you put the money into trust for your children, you pay the inheritance tax upon your death. When the trust matures and your children go to use it, they're taxed again. It's the worst."
Trump suggested he would get cooperation from wealthy individuals on his tax because the 14.25 percent net worth tax would be more than offset by the repeal of the estate tax which at that time was 55 percent.
Trump described several key inequities and problems with the current taxation system, items that are still factors today, including:
- High property taxes punish property for improving their property.
- The tax code discriminates against married people.
- The volatility of the tax code prevents people and businesses from making effective long-range financial plans.
- The complexity of the tax code results in unproductive hours spent in trying to understand and fill out tax forms.
A report in The Guardian quoted economist Andrew Hodge who warned, "Even talking about it would risk capital flight out of the country. It's pretty confiscatory in terms of property rights." Hodge is senior vice president of the Wharton Econometric Forecasting Associates (WEFA) at Wharton School of Business at University of Pennsylvania.
Trump, personally, would have been on the hook for $725 million in additional tax if his plan had been enacted.