“What just happened? It was the economy, stupid!” CNN news anchor David Goldman declared when Donald Trump (Republican) won as president of the United States of America for 2025-2029 at the Nov. 5 national elections (CNN, Nov. 6).
The American people want a change. Goldman said, “a significant number of voters blame President Joe Biden and Trump’s opponent, Vice-President Kamala Harris, for failing to make enough improvements to Americans’ financial situations over the past four years. Poll after poll suggested that Americans hold largely negative views about the US economy” (Ibid.). They jealously want a return to “the American dream” of prosperity and indulgence.
“Americans are living in the moment, optimistic that Trump can ease the pain of high inflation over the past four years. Election polls consistently showed the economy and inflation were top of mind. In the last Forbes/HarrisX national poll released the Monday before Election Day, 36% of respondents said prices/inflation were their top concern, followed by immigration and the economy at 32% and 31%, respectively,” post-election news analyses said (USA Today, Nov. 7).
The Center for American Progress Action Fund (CapAction), an independent, nonpartisan (US) policy institute and advocacy organization, volunteered an analysis of Trump’s economic plan based on what he had focused on in his first term (2017-2021) as president. “The most significant piece of legislation former President Donald Trump signed during his first term had a dramatic cut in the corporate tax rate from 35% to 21% as its centerpiece. (This was supposed to create more jobs, bring down prices, stimulate the economy.) That corporate tax cut did not trickle down to ordinary workers but cost $1.3 trillion and helped fuel a record $1 trillion in stock buybacks the year after it passed (americanprogressaction.org, June 12).
“We know that ‘privately, Trump has told allies that he is keenly interested in cutting corporate tax rates again,’ according to The Washington Post, even as corporate profits hit near record highs in 2023… The Post also reported that Trump’s advisers… have discussed proposals to make deeper cuts to the overall corporate tax rate, potentially to as low as 15%. As antitax advocate Grover Norquist told The Post, ‘I would be very surprised’ if he abandoned the push for lower corporate taxes… ‘All the people advising him before for sure think the 15% is where we need to go’.” (Ibid.).
Why the contretemps of Trump taking over the reins of the world’s leading economy, at this time of struggling out of the global recession caused by the four-year COVID pandemic and the disruption of world peace. The world economy will be affected by the US economy.
Noam Chomsky, American professor emeritus (MIT) and a “public intellectual” known for his work in linguistics, political activism and social criticism, wrote a book, Requiem for the American Dream: The 10 Principles of Concentration of Wealth & Power (2017) in which he asks “why America seemed to reach the zenith of its economic and civic vibrancy in the 1950s and ’60s and then go into a decline that has left few except the top tenth of a percent of Americans truly fulfilled or satisfied.” Reviewer Godfrey Cheshire subtly connects Chomsky’s thesis of the change in American culture and thought to the socio-politics of Trump’s first term as President (coinciding with the launch of Chomsky’s book and the partner-documentary in 2017).
“Chomsky aptly calls the process (the change) he describes a ‘vicious cycle’ — the more money that goes into politics with the intent of influencing it, the more our politics is ruled by money rather than any other definition of national welfare.” Is it suggested that Trump, being unchangeably a businessman, aka, a capitalist, will be guided by his affinity with the wealthy (as he was reportedly supported in the elections by “big business”) in guiding the economics of his country?
Note that bringing down the US corporate income tax rate from the present 21% to 15% (the centerpiece of Trump’s economic plan) will give the largest 100 US companies (the Fortune 100) a total estimated annual tax cut of $48 billion. These corporations collectively reported $1.1 trillion in profits in their last annual reports (americanprogressaction.org, op cit.).
Cutting the corporate tax rate to 15% would cost roughly $1 trillion over 10 years based on Joint Committee on Taxation (JCT) and US Treasury estimates. Yet the shortfall in government revenues will be suffered by the people, as the tax cuts (from 35% to 21%) in Trump’s first term did not trickle down to boost productivity, employment, and lower-level household income.
The (US) Center on Budget and Policy Priorities judged that “the 2017 Trump Tax Law was skewed to the rich, expensive, and failed to deliver on its promises.” Close to the elections, the Center warned that “A high-stakes tax policy debate will accelerate this year through 2025 over the pending expiration of the individual income and estate tax provisions of the 2017 Trump tax law. Policymakers should use this opportunity to work toward a tax code that raises more revenues, is more progressive and equitable, and supports investments that make the economy work for everyone” (cbpp.org, June 13).
America is told by its own sages to “make haste slowly” and to weigh and vet its strategies for economic development. Priority is to watch and avert the social degradation and undemocratic exclusion of the less privileged from opportunities for a better quality of life. The rich already have all they need and all they want.
Some less-developed countries like the Philippines might still subconsciously look up to America for how to think or act in national situations or issues — perhaps a vestige of the “relief” from 300 years of Spanish colonization. (No Filipino bashing here, for wanting to be “Westernized,” as the whole world is now actually still led by America.) Is it surprising that our socio-politics and economics are pretty much like those of the US?
President Ferdinand “Bongbong” Marcos, Jr. signed on Nov. 11 a new tax law called CREATE MORE, or the Corporate Recovery and Tax Incentives for Enterprises to Maximize Opportunities for Reinvigorating the Economy Act. It will amend Republic Act 11534 or the original CREATE Act that was crafted to help enterprises recover from the impact of the pandemic by lowering the corporate income tax rates and making the country more appealing to businesses by rationalizing fiscal incentives (manilatimes.net, Nov. 11). Its centerpiece policy is the reduction of the corporate income tax to 20% from the current 25%. There will be additional tax deductions and absolutely no taxes for specific registered business enterprises and incentives for foreign direct investors. Its implementing rules and regulations (IRR) will be released soon.
Economist JC Punongbayan comments that official projections from Malacañang say the CREATE MORE will admittedly lower tax revenues by P5.9 billion. (Understated?) “That’s not a terribly large amount. In fact, such forgone revenues would be just 2% of the government’s revenues in September 2024. But still, it represents an erosion of much-needed revenues, at this time when the budget deficit and public debt remain too high compared to our nation’s income. If you check the latest debt statistics, you’ll see that the debt-to-GDP ratio has inched up to 61.3% in September 2024. That’s higher than the 2023 level of 60.1%.” (Rappler, Nov. 15)
Deloitte analyst Senen Quizon points out that CREATE MORE allows the president to grant incentives without the recommendation of the Fiscal Incentives Review Board (FIRB), the government body with the authority to grant tax incentives to Registered Business Enterprises (RBEs). At present, the President has residual power to grant incentive packages based on the FIRB’s criteria and recommendations (deloitte.com/ph, Nov. 4).
Oops! Hope the RBE/ Foreign Direct Investors will not have to worry about the “unexpected costs” of doing business in the Philippines.
Amelia H. C. Ylagan is a doctor of Business Administration from the University of the Philippines.
