For my money, the biggest economics story recently is also one of fundamental importance to the plastics industry: the Trump administration's outline for tax reform.
In my opinion, tax reform is far more important to the country and to our industry than either health care or immigration. Those issues need to be addressed, but in the long run they are not as important as tax reform.
This is because a substantial improvement to the tax code is essential if we are to sustain a long-term trend of rising prosperity. And since trends in the demand for plastics products closely follow trends in overall economic activity, it is not a stretch to say that rising prosperity is good for the plastics industry.
It should not have taken 100 days to get this tax plan announced, especially when you consider that what was revealed is really just an outline. But I like almost everything I have heard so far. In fact, I really like it.
It is not perfect, there are some significant issues yet to be worked out, and Congress can still mess it up. But if we can get to the finish line with most of this intact, it will be an enormous improvement over what we have now. And it will result in a sustained increase in economic activity.
There are two main parts of the U.S. tax code and both are in dire need of reform: personal taxes and corporate taxes. For personal taxes, the Trump plan lowers the tax rates, decreases the number of tax brackets from seven to three, and eliminates most deductions and loopholes. Yes, yes and yes. For the majority of U.S. households, the long-term results of complicated tax laws have been uncertainty, inefficiency and even perverse incentives to make the kind of suboptimal choices that ultimately produce things like bubbles in the housing market.
We should engage in a rigorous debate about whether the proposed tax rates are too high or too low, and we can include the optimal number of tax brackets as part of that debate. But the real prize here is the elimination of deductions and loopholes. When it comes to paying personal income taxes, I can think of very few areas in our market-based economy that should be "tax-advantaged."