President Trump and his administration has elected to attempt to place a more successful reform on the tax system. This is a rather sudden switch given his initial decision to attempt a repeal and reform on the healthcare system, which inevitably failed despite the Republicans holding majority in the senate. Trump went on to state that, “Nobody knew health care could be so complicated” (Liptak, 2017). However, what President Trump fails to recognize is that if healthcare is calculus, tax reform is quantum physics. In his tax reform, he has reduced tax rates in both personal income tax and corporate tax, as well as several other features of the personal income tax (Nunns, Burman, Page, Rohaly, & Rosenberg, 2016). In this paper, I will be focusing …show more content…
However, we see that the highest tax cut is for the highest-income taxpayers, with incomes over $3.7 million, for about $1.1 million, which is greater than 14% of their after-tax income (Nunns, Burman, Page, Rohaly, & Rosenberg, 2016). Comparatively, the poorest fifth of households in America would only see a tax cut of $110, or 0.8% of their after-tax income (Nunns, Burman, Page, Rohaly, & Rosenberg, 2016). Based on the idea of efficiency, which here means that it doesn’t distort decision making, and equity, that the tax is “fair”, I would label this section as a bad tax …show more content…
In neoclassical economics, it is assumed that an increase in taxes will create an increase in excess burden. Excess burden is the social costs associated with the implementation or increase of a tax. Here, specifically, we are looking at income taxes and the behavior individual’s show in response to them. There are three possible responses we see given a change in taxes as a result of the income and substitution effect, with the income effect favoring more work and the substitution effect favoring more leisure. The first possible result is that people desire to work less, second, people will desire to work the same amount that they are currently working, and the final result, people will desire to work more. Based on this, the amount of excess burden will change. President Trump is under the neoclassical assumption, assuming that high tax rates will result in people not wanting to work and increased excess burden. His policy reflects the idea of the Laffer curve, created by Arthur Laffer, in that there is a specific threshold that if taxes are raised past will result in a counter-productive policy. This will cause the governmental revenue to decrease despite the increase in taxes. As such, Trump believes he needs to roll back taxes in order to decrease excess burden and find the peak in governmental revenue, however, one could argue he is following an outdated