Trump bravely bucked conservative ideology and put out an eminently sensible tax policy proposal. Not the one he just fleshed out yesterday of course. That rehash of Hooverism is projected to cost the economy $1 trillion and lop 5% off the GDP growth by Oxford Economics. I am talking about Trump’s testimony in front of Congress, back in Nov. 1991.
Back in that cruelest November of 1991, Congress, despondent over the economic recession, invited Donald Trump in to brainstorm. Trump himself had just seen his 8th-Wonder-of-the-World Taj Mahal go down in flames in bankruptcy court less than 3 months prior. And his other 3 casinos were waiting in the wing to go through the same the following year. It was in this milieu that a somber Trump had a moment of lucidity.
After throwing out some self serving proposals about depreciation schedules and investment syndicates, Trump laid down some truth that cuts the right wing’s supply-side tax-cut ideology off at the knees:
And the other thing is, frankly, by having cut the high income tax rates to 25 percent, as an example, people don't have the incentive any more to invest. They're saying, "Why should I take a chance on investing in low or moderate-income housing? I might as well just pay the tax."
But the fact is, that 25 percent for high-income people -- for high-income people -- it should be raised substantially with the understanding that if you invest, you can get it down and down substantially below that number. The incentive was taken away when the tax rates came down for high-income people. And I say leave the middle, leave the low lower. But people with money have to have the incentive. The dentist, the doctors -- they have to have the incentive to invest. And there's no incentive.
There you have it- a high income tax rate discourages profit taking, and encourages investing (or hiring). The distillation of everything we on the left have been saying all along. And Trump himself knew it in his rare moment of sanity and honesty.