REUTERS
As longtime advocates for pro-growth economic policies, we write to advise President Donald Trump against any tax proposal that would raise the top individual income-tax rate beyond its current level of 37%.
Recent rumors of an increase to 40% or more would represent a dangerous departure from the proven, prosperity-driving principles that have boosted America ever since the Reagan years: That is, lowering tax rates to promote economic prosperity.
History has shown time and again that reducing marginal tax rates — particularly on individuals, entrepreneurs and small businesses — unleashes economic growth, expands the tax base and ultimately generates more government revenue, not less.
Raising tax rates, on the other hand, nearly always has the same three consequences: less revenue than expected, slower economic growth and reduced income taxes paid by the rich — as higher-income filers hire accountants to take advantage of loopholes and avoid those higher rates.
From President John F. Kennedy to President Ronald Reagan, the most successful periods of economic expansion in American history followed significant reductions in tax rates.
The 2017 Tax Cuts and Jobs Act, signed into law under Trump’s leadership, was no exception.
The lower corporate and personal income-tax rates in the TCJA sparked investment, drove wage growth and boosted job-creation.
In contrast, raising the top income-tax rate now would send the wrong message to job-creators, small-business owners and investors — most of whom file as pass-through entities and would be directly impacted by such an increase.
Penalizing the very engine of job creation in this country would be an economic misstep with far-reaching consequences.
In fact, rather than considering increases, we should be looking for opportunities at this time to further reduce rates and compress income-tax brackets.
Additionally, lowering the capital-gains tax to 15% would spur investment, unleash dormant capital and provide a much-needed boost to long-term economic growth.
As a political matter, we’ve seen what happens to voter support for the GOP when the party raises tax rates.
The 1990 tax hike under President George H.W. Bush contributed to a sluggish recovery and set the stage for political upheaval.
Increasing tax burdens on the most productive segments of the economy weakens growth and discourages risk-taking and innovation.
We urge President Trump to stay true to the Republican Party’s long-held commitment to low tax rates and a vibrant free market economy.
Rather than backpedaling on these core principles, now is the time to double down on policies that promote growth, competition and entrepreneurial dynamism.
Raising the top tax rate would undercut those efforts and send a signal of retreat from the economic philosophy that has made America the most prosperous nation in history.
The 2017 Tax Cuts and Jobs Act was an overwhelming economic success.
We look forward to continuing to work with the president to make those tax cuts permanent — and to lower tax rates to make the American economy great again.
Steve Forbes, Arthur Laffer and Stephen Moore are co-founders of Unleash Prosperity.