What a day today in markets!
More on that later, but as a follow up to the blog article we published last week about the market missing the big picture about tariffs and the economy, we wanted to highlight some recent commentary by two very notable economists, Steve Moore and Steve Forbes, regarding tariffs and the tax system. Last December, Moore and Forbes published an op-ed in the Wall Street Journal that argued in favor of reducing the personal-income and corporate tax rates to a flat tax rate of 15%. In the article, they detailed how by eliminating wasteful business deductions and loopholes, the simplified low rate will supercharge the economy. They even claimed that this measure to keep more money in the pockets of Americans could ironically end up causing the “rich” to pay even more (not sure that is needed since the highest earners already pay the vast majority of taxes, but...).
In Moore’s newsletter, the Unleash Prosperity Hotline, he recently doubled down (and more) on this proposal in the context of the recent tariff announcements by the Trump Administration. He argued that higher tariffs must be offset by pro-growth tax cuts if we are to restore investor confidence and return to growth in the stock market. Moore believes that this would in effect pay for the cost to taxpayers that the tariff represents as Trump goes about trying to reshape trade relationships around the globe. He suggested a "15% plan": 15% tariffs, 15% corporate tax, 15% personal income tax, 15% capital gains/dividends/death tax, etc. Our only counter is that maybe it should be 10%!
We have been arguing for a tax cuts and a simplification of the tax code to a flat tax for years, and we have our blog articles here, here, and here to prove it. As we argued last week, these Trump tariffs can be even more effective if they are bolstered by fiscal measures that allow Americans to keep more of their hard-earned money—and invest more of it into dynamic companies.
The good news is that Trump already has made comments that indicate he is headed in a positive direction in terms of fiscal policy, such as when he proposed reducing the federal corporate tax rate to as low as 15%. We suspect President Trump will not read our blog, but hopefully he will listen to smart guys like Moore and Forbes in this tense moment in the markets and take these economy-boosting measures.
Given the announcement today that he was pausing the reciprocal tariffs on the entire world x-China, for 90 days, it appears that the trade issue is far from over but that the President clearly has a long-term plan in mind. It is likely wise for investors to let this play out as the wild recovery in the market today demonstrated how dangerous it is to be a trader.
Our nation’s government has a real opportunity here to make a very positive impact in favor of economic growth. Regardless of what happens, we will be here using our blog to add to the chorus of those calling for the right actions to unleash prosperity.
