Going big on taxes
The hastily rolled out outline of a Trump tax plan — emphasis on the outline — is a good starting point. It has the potential both to jump-start economic growth and ease the burden on middle-class taxpayers.
The devil, of course, is ... well, you know.
President Trump, obsessed with the 100-day mark he has spent all week disparaging, was determined to introduce the biggest tax cut ever even if it was lacking in details.
Now, lowering the corporate tax rate to 15 percent from its current 35 percent could indeed boost the economy, which has been growing at an anemic rate of 2 percent or less for the past seven years or so. Small businesses, which are huge job generators, would get similar breaks.
“The tax plan will pay for itself with economic growth,” Treasury Secretary Steven Mnuchin, assured this week.
That is, of course, the premise of the Laffer Curve, brainchild of Arthur Laffer, father of supply-side economics, who convinced President Reagan of the wisdom of massive tax cuts more than a generation ago. There are surely doubters, many of them among the president’s own party in the Congress, who are also waiting to see what this would do to the deficit — at the very least in the short term.
Average Americans, on the other hand, simply want to know what’s in it for them. And that’s the question that’s impossible to answer right now. Yes, the White House proposal would consolidate the current seven tax brackets into three — 10 percent, 25 percent and 35 percent — lowering the top one from 40 percent. But at what income levels they would hit is still anyone’s guess.
The plan would preserve the mortgage and charitable deductions, but do away with dozens of others, including that for state and local taxes. It lowers the capital gains tax rate, eliminates the alternative minimum tax and the estate tax — yes, a boon to the wealthy — but doubles the standard deduction, a break for everyone else.
GOP deficit hawks will remain skeptical and Democrats will bemoan it — as U.S. Senate Minority Leader Chuck Schumer did yesterday as “a massive tax break” for “the very, very wealthy.”
Politically, however, it may well be in that sweet spot where a fractious Congress could find it too attractive to resist — and that looks like a good thing.