Skepticism greets Trump plan
Economists: New tax, growth ideas still don’t add up
WASHINGTON — Donald Trump scaled back his grandiose plan for tax cuts while proposing more benefits for lower- income households in a speech Thursday, but experts say the numbers in his newly revised economic growth blueprint still don’t add up.
In his most detailed economic plan to date, the Republican presidential nominee essentially halved the amount of tax cuts he will seek to $4.4 trillion over 10 years, in part by capping deductions. At the same time, Trump said his economic strategy — which includes overhauling government regulations, trade and energy policies — would boost U.S. economic growth to 3.5 percent a year on average, up from 2 percent in recent years. He promised that his plan would create as many as 25 million jobs over the next decade.
“This is the most progrowth, pro-jobs, pro-family plan put forth perhaps in the history of our country,” he said in a speech at the Economic Club of NewYork.
While responding to critics that his previous tax and growth plans were vague and unrealistic, Trump nonetheless raised questions about how he could achieve such rapid economic growth and pay for what are still very large tax cuts to individuals and businesses.
“It’s still very pie-in-thesky,” said Marc Goldwein, senior vice president for the Committee for a Responsible Federal Budget, a nonpartisan group that advocates keeping government budgets under control.
Trump’s plan would reduce the tax brackets for individual income tax to GOP hopeful Donald Trump said in New York on Thursday that his economic plan is “pro-growth, pro-jobs, pro-family.” three from the current seven, with the highest rate dropping to 33 percent from 39.6 percent. Deductions would be limited at $100,000 for single filers and $200,000 for married filers, which would restrain high-income filers looking to deduct more for housing and charitable donations.
In an attempt to appeal to lower- and middle-income Americans, Trump called for an expanded earned income tax credit and tax savings for child care.
In addition, it appeared that sole proprietorships, partners and other so-called pass-through entities, which tend to be used by higherincome filers, would not be able to take advantage of Trump’s plan lowering the corporate tax rate to 15 percent from the current 35 percent, said Howard Gleckman, a senior fellow at the Tax Policy Center. Trump’s speech and additional details released by his campaign did not make it clear.
“This proposal is less skewed toward the highincome” earners, Gleckman said. Still, he said, the lowering of tax rates, plus Trump’s previously announced idea to repeal the estate tax and alternative minimum tax, would nonetheless still end up disproportionately benefiting higher-earning individuals.
Although Trump’s plan would cut taxes overall by $4.4 trillion over 10 years, he said that the lost federal revenue would amount to about $2.6 trillion under a so-called dynamic growth model, which assumes that the tax cuts would stimulate growth and thus generate additional revenues. By its calculations, Trump’s economic team would make up for about $1.8 trillion of the $2.6 trillion deficit largely by negotiating more favorable trade deals, reforming energy policies and eliminating costly government regulations.
The remaining deficit would be shaved by reducing government spending, although Trump said there would be no reduction in defense and Social Security, Medicare and Medicaid, which together make up about three-quarters of the federal budget.
Taken together, said Peter Navarro, a University of California at Irvine professor and Trump economic adviser, “it’s really not a stretch at all” to return the nation’s annual economic growth to the historical average of 3.5 percent from the end of World War II through 2000.
“It’s a fairly simple walk,” he said Thursday from New York, where he joined Trump for his speech.
But other economists, conservative and liberal, are much more circumspect.
“If he could go from 2 to 3, that would be amazing; he’d be in the hall of fame,” said Douglas Holtz-Eakin, president of the right-leaning American Action Forum.
The challenge for Trump is that economic growth is essentially a function of the number of workers and the rate of productivity growth, and both have lagged in the last decade. Greater business investment and higher wages will help lift both measures, but many other economists believe Trump’s tough trade promises — to renegotiate the trade pact with Canada and Mexico and threats to impose big tariffs on China and other trading partners — will hurt global trade and end up subtracting from U.S. economic output growth.
“It’s fair to say that he has a fairly pro-growth policy to take growth north of 2 percent,” Holtz-Eakin said. “The trouble is, he’s overcounting what he could get. ... They’re seriously responding to the critique and now they’re claiming it adds up — I don’t think it does.”