White House officials working on trade policy were alarmed last month when a top adviser to President Trump circulated a two-page document that alleged a weakened manufacturing sector leads to an increase in abortion, spousal abuse, divorce and infertility, two people familiar with the matter said.The documents, which were obtained by The Washington Post, were prepared and distributed by Peter Navarro, director of the White House Office of Trade and Manufacturing Policy. They were presented without any data or information to back up the assertions, and reveal some of the materials the Trump administration reviewed as it was crafting its trade policy.
Mr. Trump’s Council of Economic Advisers said in a report released on Monday that reducing corporate taxes could raise average household incomes by as much as $9,000 a year. The top end of that estimate was based on work by a trio of researchers, and on Tuesday one of them, Mihir Desai of Harvard, said Mr. Trump’s team had misread the research. The actual income gain implied by his study, he estimated, would be $800.
The problem with [the supply side] case is that it assumes a strongly positive effect of tax cuts on economic growth that does not appear to exist. Bill Clinton raised tax rates and the economy sprinted ahead. George W. Bush cut them and the economy limped. Barack Obama’s second term featured higher tax rates than his first one, and a better economy. This evidence does not prove that tax cuts are harmful. It is consistent with the possibility that tax cuts have a mildly positive effect that other factors can defeat. It is not consistent with the idea that it makes an enormous difference whether the top tax rate is closer to 30 or to 40 percent.The supply-side argument itself implies that cutting tax rates has diminishing returns. Reducing the top tax rate from 70 to 50 percent, as the initial Reagan tax cuts did, meant that making an additional pre-tax dollar netted someone in the top bracket 50 cents instead of 30. The incentive to make that dollar was 67 percent higher. The House Republican plan, by cutting the top rate from 40 to 33 percent, would increase the incentive by just 12 percent.
This is because the plan’s immediate benefits heavily tilt toward corporations and the rich. Large corporations would get more than a 40 percent cut in their tax rates, from 35 percent to 20 percent. Smaller, privately held businesses would see a similar decline, from as high as 39.6 percent to 25 percent. Economists argue about the effect of these changes on the national economy, but the political import is clear: Combined with a proposed cut in the top rate on labor income from 39.6 percent to 35 percent, liberals will enjoy saying that the well-to-do will fare well under the GOP plan. . . .The plan raises the lowest rate of tax from 10 to 12 percent, meaning some working-class workers will see a slight raise in their tax rates. Middle-income workers will at best see a modest drop in the tax rate they pay, from 15 to 12 percent. Compared with what the wealthy get right away, that’s small beer.The plan’s authors point to a near doubling of the standard deduction most taxpayers take. However, the plan also eliminates the personal exemption all taxpayers currently take for each member of their household. If you have two or more children, the increase in the standard deduction is smaller than the amount of the exemptions you will lose. Taxes for big families may go up.