Proposal’s murky details:
3 income brackets, top rate lowered
WASHINGTON: President Donald Trump on Wednesday proposed sharp reductions in individual and business income tax rates and a radical reordering of the tax code that would significantly benefit the wealthy, but he offered no explanation of how the plan would be financed as he rushed to show progress before the 100-day mark of his presidency.
Trump’s skeletal outline of a tax package, unveiled at the White House in a singlepage statement filled with bullet points, was less a tax plan than a wish list. Treasury Secretary Steven Mnuchin and Gary Cohn, the director of Trump’s National Economic Council, laid out the bare bones to reporters.
It was part of a mad dash toward the administration’s 100th day Saturday that has included a resurrection of a health care bill, near-daily signing of executive orders and the possible withdrawal of the United States from the North American Free Trade Agreement.
But they offered none of the standard accouterments of such rollouts, such as detailed charts showing the cost of each provision, phase-in periods, the effects of the proposals on people and testimonials on the programme’s potential benefits.
“We have a once-in-a-generation opportunity to do something really big,” Cohn said. “President Trump has made tax reform a priority, and we have a Republican Congress that wants to get it done.”
The proposal envisions slashing the tax rate paid by businesses large and small to 15%. The number of individual income tax brackets would shrink from seven to three — 10, 25 and 35% — easing the tax burden on most Americans, including the president, although aides did not offer the income ranges for each bracket.
Individual tax rates currently have a ceiling of 39.6% and a floor of 10%. Most Americans pay taxes somewhere between the two.
The president would eliminate the estate tax and alternative minimum tax, a parallel system that primarily hits wealthier people by effectively limiting the deductions and other benefits available to them — both moves that would richly benefit Trump.
Little is known of Trump’s tax burden, but one of the small nuggets revealed in the partial release of a 2005 tax return this year was that he paid $31 million under the alternative minimum tax that year.
Corporations would not have to pay taxes on their foreign profits, an unusual proposal for a president who has championed an “America first” approach and railed against companies that move jobs and resources overseas.
They would also enjoy a special, onetime opportunity to bring home cash that they are parking overseas, though administration officials would not say how low that rate would be or how they would ensure that money would be invested productively.
Trump wants to double the standard deduction for individuals, essentially eliminating taxes on around $24,000 of a couple’s earnings. That proposal was met with alarm by homebuilders and real estate agents, who fear it would disincentivise the purchase of homes.
The proposal would scrap most itemised deductions, such as those for state and local tax payments, a valuable break for taxpayers in Democratic states like California and New York.
But the president would leave in place popular breaks for mortgage interest, charitable contributions and retirement savings.
In a brief session with reporters, Cohn and Mnuchin said they had been toiling for weeks on the proposal, much of which closely resembles the plan Trump championed as a presidential candidate.
They argued that it would spur robust economic growth that would — along with the elimination of deductions — cover the potentially multitrillion-dollar proposal entirely, a prospect that even many Republicans privately concede would be virtually impossible.
“This will pay for itself with growth and with reduction of different deductions and closing loopholes,” Mnuchin said, repeating his optimistic estimate that it would spur the economy to grow at a rate of 3% annually.
“The economic plan under Trump will grow the economy and will create massive amounts of revenues, trillions of dollars in additional revenues.”
Democrats rejected what they described as magical thinking behind the plan and condemned it as a giveaway to the rich masquerading as a tax overhaul.
“This is an unprincipled tax plan that will result in cuts for the 1%, conflicts for the president, crippling debt for America and crumbs for the working people,” Sen Ron Wyden, D-Ore., the ranking member of the Finance Committee, said in a statement. “Instead of providing a real tax reform plan as promised, this administration is offering cakes to the fortunate few.”
Bernard Baumohl, the chief global economist at the Economic Outlook Group, a forecasting firm, was unsparing.
“The effort to introduce more fiscal stimulus into the economy is genuinely underway,” he wrote to clients. “But the bare bones plan we saw unveiled today is already conceptually flawed and unlikely to go far in Congress.
“The final product will bear no resemblance to the principal points highlighted in today’s meagre release. Certainly the first step in this process was unimpressive.”
Cohn insisted that the plan was “the most significant tax reform legislation since 1986” — the last time a comprehensive tax overhaul was enacted — as well as “one of the biggest tax cuts in American history,” in line with Trump’s grandiose portrayal.