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Experts question impacts of Trump economic policy

Republican presidential candidate Donald Trump spoke in the Greensboro Coliseum on Tuesday, June 14.
Republican presidential candidate Donald Trump spoke in the Greensboro Coliseum on Tuesday, June 14.

Trump’s path for the economy — originally outlined in his speech at the New York Economic Club on Sept. 15 — focuses on cutting taxes for all incomes, lowering the corporate income tax and decreasing government regulations.

Michael Walden, a professor of economics at North Carolina State University, said Trump’s plan is grounded in supply-side economics.

“This is not a new concept — this has been around at least 40 years,” Walden said.

During his speech at the Economic Club, Trump said his plan would create an average Gross Domestic Product growth of 3.5 percent each year for the next 10 years, while adding 25 million new jobs to the economy.

Walden said presidents usually have a modest impact on the economy during their time in office.

“Think of the economy as a $19 trillion ocean liner out there, and what the presidents and congresses can do is kind of nudge it one way or the other,” he said.

According to an analysis of Trump’s plan from the Tax Foundation, the tax plan would increase GDP over the next 10 years by 6.9 percent or 8.2 percent. The Tax Foundation offers two estimates because the new tax plan does not clarify whether certain small businesses would be taxed as corporations or individuals — a point of contention on both sides of the aisle.

Trump’s plan includes reducing the current income tax brackets from seven to three, with lower tax rates for all incomes.

According to the Tax Foundation analysis, although after-tax incomes of all groups would increase under this plan, the top earners would benefit the most. Currently, the top tax bracket is taxed at a rate of 39.6 percent, but this rate would decrease to 33 percent under Trump’s plan.

Trump also proposed lowering the corporate tax rate to 15 percent from 35 percent.

“The corporate income tax is a substantial burden on investment in the U.S.,” said Alan Cole, an economist at the Tax Foundation’s Center for Federal Tax Policy, in the report.

According to the report the current rate is the highest in developed world, but the proposed 15 percent rate would make it one of the lowest.

The report also noted the new plan, accounting for economic growth, would reduce government revenues by between $2.6 trillion and $3.9 trillion.

Walden said politicians often overstate the impacts of certain policies. But if Trump were elected president, this plan could be used as a starting point for negotiations with Congress, Walden said.

“It would probably be fair to say that most economists would say that Mr. Trump’s plan, in terms of results, is overly optimistic,” Walden said.

@BollingerLuke

state@dailytarheel.com

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