Priming the pump

Published 12:32 pm Wednesday, September 21, 2016

Earlier in the summer, I wrote about how we could dramatically change our national economy if we reduced the taxes on profit that American corporations pay on profits made overseas. Finally, one candidate for president has adopted the idea.   

Last week, Donald Trump included this among his proposals to revitalize our economy. He offered immediate balancing of his new investment plan with a 10 percent repatriation rate to incentivize American firms overseas to bring $2.5 trillion home. 

This would be new money that is not and will not be taxed if it is not returned to America, but instead is invested elsewhere in the world. Using these new tax dollars to help pay for tax cuts will put money back in the pockets of taxpayers and stimulate spending and new business investment. In turn, those new investments will increase job opportunities.

The balance of Trump’s proposal is based on the tax cuts  Presidents John F. Kennedy and Ronald Reagan used to stimulate sluggish economies in 1960 and 1980. Kennedy proposed lowering marginal tax rates for all taxpayers and reducing the corporate tax. He advised lowering the top tax rate from 91 to 65 percent and closing tax loopholes.

Kennedy said, “It is a paradoxical truth that tax rates are too high today and tax revenues too low, and the soundest way to raise revenues in the long run is to cut rates now.”

The U.S. economy grew by roughly 5 percent yearly for nearly eight years. Twenty years later, Reagan launched a 30 percent tax-rate reduction to save the economy from the high-unemployment, high-inflation 70s. 

Reagan acknowledged he was following in Kennedy’s footsteps. Under Reagan, tax rates were slashed from 70 to 28 percent, corporate taxes were cut, and numerous loopholes were closed.

And the American economy grew mostly between 4 and 5 percent annually for more than 25 years. Trump proposed a positive, optimistic growth message following the JFK-Reagan model.  “My economic plan,” he said, “rejects the cynicism that our labor force will keep declining, that our jobs will keep leaving and that our economy will never grow as it did once before.”

He established a goal of 4 percent economic growth, which would double the stagnant rate of the past 15 years. The centerpiece of his plan is a reduction in business tax rates for large and small firms to 15 percent from the current uncompetitive 35 to 40 percent. High business taxes are the biggest obstacle to a return to rapid economic growth.

Abundant research has shown the best way to raise wages and create jobs is to slash business taxes. Within five years, a business tax cut will pay for itself and then some. Importantly, Trump plans to reduce individual tax rates with three brackets of 12, 25 and 33 percent. He would cap deductions for the wealthy and close special-interest loopholes. Middle-income wage earners will be the biggest beneficiaries of these reforms.

Additionally, he will roll back out-of-control regulations, unleash American energy and abolish the Obamacare failure. Following the successes of the JFK and Reagan tax reforms, Trump’s strategy is likely to generate 4 to 5 percent growth over time.

Trump has an economic recovery and prosperity plan. Hillary Clinton has an austerity recession plan. You and I will have to decide who has the best plan for our family’s future. Choose wisely for your children and grandchildren.

Frank Ruff, a Republican, represents Charlotte County in the Virginia Senate. His email address is