Macroeconomic Analysis on Trump’s Tax Plans

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He has not been seated as the president yet, but Trump is already being bombarded by one negative news to the next. Just recently, the presidential candidate was criticized for his supposed sexual assault on some women. Now, the University of Pennsylvania's Wharton School says that his tax plans for the country is bound to hurt the economy. According to the report, Trump’s plan to alleviate tax burden in businesses and high-income earning Americans could indeed boost economic growth temporarily. However, they foresee future federal debt as a result. How?

Reducing the tax for businesses will decrease revenue significantly – the experts anticipate this to go by the trillions. This will in turn create a domino effect where the United States will be forced to borrow money for the ailing economy. The government may also be up against the private sector, where the two are expected to become rivals in attracting dollar investors – this they say is not good at all.

Hillary Clinton’s tax plans pitted against that of Trump’s is obviously different. Clinton plans to decrease taxes for employees while increasing those that will be paid by businesses. The Wharton School says that the effect is contradictory to Trump’s – this will look bad for the country in the beginning but will drive it to better economic standing after several years. The raised revenue as a result of her proposal will not put the country in debt.

Trump and his advisers on the other hand do not quite agree with the report. They say that the experts only took into consideration the tax regulation but did not study the other factors that are connected with it. Peter Navarro, an adviser of Trump who is an economist from the University of California-Irvine, says that the report totally ignored the growth that should have come along with it, which made it unreliable. Similarly, Clinton’s side preferred that the study should have been done on a wider scope.