U.S. Can Afford Trump's Radical Tax Cut

The Trump administration announced Wednesday its intent to proceed with a radical cut to the corporate income tax, lowering it to 15 percent. We haven’t been presented with enough details to conclude whether such a plan can work, but I’ve been seeing some of my fellow economists claim -- incorrectly -- that we can’t afford those changes. There are some potential problems with President Donald Trump’s proposal, but there is no fiscal reason such a tax plan ought be ruled out.

It seems the administration is willing to consider a tax cut that increases the budget deficit, rather than finding alternative revenue elsewhere. And indeed the new plan is likely to increase budget deficits by hundreds of billions of dollars. But still, less money for the government is not the same as an economic cost. Most versions of the plan, if executed properly on the details, would most likely boost economic output and create new jobs.