Trumponomics and Taxation

Published: March 2018

At the end of 2017 President Trump signed into law the Tax Cuts and Jobs Act which Republican supporters argue would transform the US economy and stimulate an enduring increase in the rate of economic growth. The motivation behind the legislation appears to be the belief that a reduction in corporate taxation will release a flood of entrepreneurial initiative that will increase investment and, as a consequence, lead to higher wages and sustained faster economic growth. The Reagan administration tried tax cuts before to stimulate growth; not in a conventional neo-Keynesian way aimed at raising aggregate demand, but as a means of strengthening the supply side of the economy. As an economic philosophy, Trumponomics is a rather high-risk strategy. Compared to the early 1980s there is a smaller output gap, a much higher level of national debt and less fiscal space.

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