Americans who want a booming economy had more reason to be optimistic last week.
First, President Trump paused his announced tariffs, giving him room to negotiate with other countries — including our allies — about lowering their many unfair trade barriers.
More important, House Republicans on Thursday passed a budget bill, setting the stage for making Trump’s 2017 tax cuts permanent. The final bill could pass within a month, maybe two.
Make no mistake: Tax cuts are the key to Trump’s presidential legacy. Tariffs might help boost American businesses, but nothing does more to lift up Americans themselves than lower taxes.
I say this with all due respect for the president’s focus on trade. I’m not one of those freaking out over the massive tariffs he unveiled on April 2, which he hopes to use in the short run to usher in a new era of not just free, but fair trade.
Tax cuts, though, are the real key to bigger paychecks, better jobs and a booming economy.
Most of all, permanent tax cuts will enable the entrepreneurship that makes everything else possible.
Every American remembers the incredible economy that resulted from Trump’s 2017 tax cuts.
Wages grew at their fastest pace in 20 years — and workers at the bottom of the income scale saw 400% faster wage growth than the wealthy.
Unemployment fell to a 50-year-low, and the lowest level ever for black and Hispanic workers.
Small businesses flourished, which really matters: Start-ups and mom-and-pop shops create two out of every three net new jobs nationwide.
The fond memory of the Trump boom is exactly why Americans, including unprecedented numbers of minority voters, elected him again in 2024.
But a lot of his tax cuts are set to expire at the end of this year, including income-tax relief and small business relief.
If those tax rates rise, an economic boom is virtually impossible. A bust will likely be inevitable.
And all Americans will suffer — because entrepreneurs will find it much harder to keep their doors open or to start new businesses in the first place.
That risk-taking spirit has always been the key to this country’s growth, innovation and frankly, our economic exceptionalism.
We don’t have the biggest and most powerful economy in the world because of big businesses: Our economy is second to none because we’ve made it easy for anyone to start their own small business.
But higher taxes are the single biggest barrier to starting a business.
I know this because I started my own retail company in the early 1990s.
At the time, taxes were even lower than they are after Trump’s 2017 tax cuts. After accounting for taxes and household expenses, I was able to devote 52% of my income to starting and building my business.
I needed every penny — because even though lower taxes made it easier, starting a small business is still incredibly hard, and incredibly expensive.
I doubt I could have done it in the years just before those Trump’s tax cuts.
Taxes rose a lot between the early 1990s and 2016. Ditto if his tax cuts expire at the end of this year.
Adjusting for inflation, I’d be paying $80,000 more to the IRS than I did in the early 1990s. Without that cash, I don’t see how I could have gotten my company off the ground.
Millions of Americans are confronting the same looming problem, and not just current small-business owners: The next generation of entrepreneurs needs lower taxes to make their dreams a reality.
If taxes rise to pre-2017 levels, many if not most will find their dreams dashed — especially the entrepreneurs who are starting with little to nothing.
And that’s going to be a nightmare for the entire economy.
Fewer small businesses means lower wages, fewer jobs and less of the innovation that transforms our standard of living.
Trump ran on a promise to make Americans richer. Now he needs to keep that promise by making his tax cuts permanent as soon as possible.
The president can’t let himself get distracted by tariffs. He needs to make an all-out push to get his tax cuts over the congressional finish line.
When he announced his tariffs on April 2, he called it “Liberation Day.”
But the real liberation will come on the day he and Congress give Americans the permanent tax cuts they deserve.
John Tillman is CEO of the American Culture Project.