Atanas Stoyanov
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Trump’s Economic Plan And Wall Street

Republican presidential nominee, Donald Trump unveiled his economic plan Monday, a plan that was both praised and criticized almost immediately.

The basic highlights of Trump’s plan appear below.


Trump’s Economic Plan

In no particular order Trump’s plan calls for sanctions, including tariffs again certain trading partners, a rollback to many environmental regulations, massive infrastructure spending, a large child care costs tax deduction and a moratorium on federal regulations that, in his words would “reduce employment.”

Finally, he plans to enact large tax cuts and restructure the tax code so there are 3 tax brackets of 12%, 25% and 33%. Last September Trump suggested 4 brackets of 0%, 10%, 20% and 25%, a proposal that was roundly criticized because, among other things, of the impact it had on something called “carried interest.”

Carried Interest

The new top tax rate of 33% may help address one big criticism of Trump’s original plan – the possibility that private equity and hedge fund managers would not actually pay much more in taxes even if the carried interest loophole were eliminated.

That so-called loophole allows certain fund managers to count earnings as capital gains instead of ordinary income – subjecting that income to a tax rate of 23.8%. With a top rate of 25% (previously proposed) fund managers would only pay an additional 1.2% as opposed to the additional 15.8% they would pay under the old systems. Under Trump’s new proposed system, fund managers could pay an additional 9.2%.

Reduced Business Tax Rate

Of course, if Trump’s planned 15% business tax rate is passed, overall revenue may go down – at least according to the Brookings Institution’s Tax Policy Center.

Those earning carried interest classified as partnerships would be taxed at the 15% rate. Others, such as Bobby Franklin, president of the National Venture Capital Association, defend the original carried interest which, they say plays a critical role in the growth of the U.S. entrepreneurial ecosystem.


The Real Story On Corporate Taxes

On the other hand – say some – if Trump’s plan to cap business taxes at 15% were to go into effect, that would boost corporate profits and be a good thing for shareholders and the public alike. This is based on potential savings from the current 35% top statutory tax rate of 35% which could be invested in more jobs to grow the economy.

Unfortunately, according to the U.S. Government Accountability Office (GAO), for tax years 2008-2012 profitable large corporations only paid an actual average effective tax rate of about 14% – 1% lower than Trump’s proposed cap.

That’s not to say companies that paid more – such as ExxonMobil Corp. (NYSE:XOMC), which paid $146 billion in taxes; Chevron Corp. (NYSE:CVXC), which paid $85.5 billion; and ConocoPhillips (NYSE:COPC), which paid $58.2 billion wouldn’t welcome some tax relief since the oil and gas industry pays the highest effective tax rate in the U.S.

On the other hand, CBS Corp. (NYSE:CBSC), Mattel Inc. (NYSE:MTC), Prudential Financial Inc. (NYSE:PRUC) and Ryder System Inc. (NYSE:RD), which effectively paid no taxes between 2010 and 2015 are probably more than willing to leave well enough alone.