Trump’s tax reform plan is a large effort on the path of Kennedy and Reefan

These proposed business rates involve some backtracking, as Trump originally proposed a close to world’s best 15 percent federal corporate rate, with a 20 percent pass through rate. While that would have left America’s business taxes level with Europe and Asia, the proposed business rate reductions are still very pro-growth.

For individual taxes paid by workers, the current seven income tax rates are replaced by three: 12 percent, 25 percent and 35 percent. That does not involve increasing the current 10 percent rate to 12 percent, as some news outlets have reported. The doubling of the standard deduction and increased child tax credit effectively reduce that 10 percent rate to zero at all income levels to which that 10 percent applies today.

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The plan also repeals the multiple taxation of capital involved in the death tax and the Alternative Minimum Tax (AMT) and repeals itemized deductions that are primarily are used by the wealthy, as only 5 percent of taxpayers actually itemize. That should include the deduction for state and local taxes, which only encourages higher state taxes.

Additionally, the plan involves “expensing,” or an immediate deduction for capital investment, just like for all other expenses for the production of income. Current law requires capital investment to be deducted over many years, as many as 30, under arbitrary “depreciation,” which expensing would replace.

That extended depreciation timeline discourages the capital investment that provides the foundation for increased jobs at higher wages. Tax Foundation studies show that expensing has a very powerful pro-growth effects. But Republicans’ plan involves some backtracking on this, as it limits expensing to only five years, though Congress is widely expected to routinely extend that repeatedly. That lack of permanence, however, undermines the resulting investment and pro-growth effects.

Too many on both the Left and the Right are unnecessarily exercised about the possible net revenue loss of this pro-growth, tax cutting reform. Reagan cut rates for everyone by 25 percent, but the resulting booming growth actually made the plan revenue positive. Federal revenues doubled while he was president—despite his rate cuts.

Similarly, Kennedy cut rates for everyone by about 23 percent, and the consequentially booming economy created revenue positive results the very next year. The fundamental economic truth is when the economy is rising, revenues will rise, regardless of the rates. And when the economy is declining, revenue will decline, regardless of the rates.

These are historical facts, not opinion.

Peter Ferrara is a Senior Fellow at the Heartland Institute, and a Senior Policy Adviser to the National Tax Limitation Foundation. He served in the White House Office of Policy Development under President Reagan, and as Associate Deputy Attorney General of the United States under President George H.W. Bush.