The Trump administration's tax plan is an atrocity - By Lawrence H. Summers

The Trump administration’s tax plan is not a plan. It is a melange of ideas put forth without precision or arithmetic. It is not clear enough to permit the kind of careful quantitative analysis of its expected budget costs, economic effects and distributional implications that precedes such legislation in a serious country.

It is clear enough, however, to demonstrate that the claims of Treasury Secretary Steven Mnuchin, National Economic Council Director Gary Cohn and Council of Economic Advisers Chair Kevin Hassett are some combination of ignorant, disingenuous and dishonest. Hassett, whose job is to stand up for rigorous apolitical economic analysis, had the temerity last week to accuse the Tax Policy Center — staffed by many of the most distinguished tax analysts in the country — of issuing “scientifically indefensible” “fictions.” He and his colleagues should look in the mirror.

We know enough to say that a tax-reform plan along the lines of the administration’s sketch would not substantially increase economic growth, would blow out the budget deficit and would make the United States an even more unequal place.

The administration pushes the idea that somehow cutting the corporate tax rate will be a huge spur to investment. It is certainly possible that with a lower tax rate accountants will locate more corporate income in the United States, but a big spur to investment seems unlikely. With after-tax long-term interest rates well below 2?percent, the stock market sky-high and businesses able to write off investments immediately, capital costs have never been lower. True, there is much cash parked overseas. But almost all the companies that have done so also have cash hoards in the United States that they have chosen not to invest. The first-order effect of a Trump administration “territorial system” that renounced a U.S. tax claim to overseas corporate income would be to encourage relocation of productive activity to tax-haven jurisdictions, slowing U.S. growth.

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