Jack Yoest, Assistant Professor of Management at The Busch School of Business and Economics at The Catholic University of America, comments on the president’s tax plan.
“When President Reagan cut taxes there were some surprises, unanticipated and unintended.
Watch for the same with President Trump’s tax reform.
An unintended consequence was seen in the year immediately after Reagan’s tax cuts were passed and before the cuts took effect. Businesses stopped all capital purchases in this gap. Decision makers waited for the plan to go into effect. Tax revenue declined in the interim.
What was unanticipated was the behavior of individual tax filers. Taxpayers might consider the cost of expensive tax avoidance schemes in light of the overall tax burden. For example, a taxpayer would forgo a $1,000 tax shelter and might pay an additional $100 in taxes. Why? It was easier and less expensive to manage.
Change in behavior was part of dynamic Reagan tax plan. Look for the same results from the Trump reforms.”