Rev­enue loss put at $7.8 tril­lion if taxes cut

Northwest Arkansas Democrat-Gazette - - NATIONAL - SAHIL KA­PUR

Pres­i­dent Don­ald Trump’s pro­posed tax cuts would lower fed­eral rev­enue by $7.8 tril­lion over a decade and mostly ben­e­fit the high­est earn­ers, ac­cord­ing to a study re­leased Wed­nes­day by the non­par­ti­san Tax Pol­icy Cen­ter.

The study eval­u­ated the one-page out­line re­leased by the White House on April 26.

About 40 per­cent of the tax cuts would go to the top 1 per­cent of earn­ers, who would see an av­er­age af­ter-tax gain of 17.8 per­cent. By con­trast, the mid­dle one­fifth of Amer­i­cans would see an av­er­age gain of 3.3 per­cent, the study said.

When ac­count­ing for rev­enue- rais­ing mea­sures, like end­ing most item­ized de­duc­tions and per­sonal ex­emp­tions, the 10-year rev­enue loss un­der the Trump tax plan would be $3.5 tril­lion, the study found. The top 1 per­cent’s gains would be 11.5 per­cent, while mid­dle-in­come gains would be 1.3 per­cent, the re­port said.

Trump’s out­line would cre­ate a 15 per­cent tax rate for busi­nesses of all stripes — down from cur­rent rates that can top 35 per­cent. It would also con­sol­i­date the ex­ist­ing seven in­di­vid­ual tax rates to just three — cut­ting the top rate to 35 per­cent from the cur­rent 39.6 per­cent.

The plan would also elim­i­nate a 3.8 per­cent tax on in­vest­ment in­come for high-earn­ers that was en­acted as part of the 2010 Pa­tient Pro­tec­tion and Af­ford­able Care Act.

The White House plan lacked suf­fi­cient de­tail for com­plete rev­enue scor­ing; for ex­am­ple, the three in­di­vid­ual tax rates weren’t at­tached to spe­cific in­come brack­ets. So the Tax Pol­icy Cen­ter anal­y­sis filled in some blanks us­ing pro­pos­als from Trump’s pres­i­den­tial cam­paign.

At the same time, some pro­pos­als, such as re­peal­ing the al­ter­na­tive min­i­mum tax and the es­tate tax, were rel­a­tively easy to score, said Mark Mazur, the tax cen­ter’s di­rec­tor.

Trump ad­min­is­tra­tion of­fi­cials have re­peat­edly pitched the pres­i­dent’s plan as a ben­e­fit for mid­dle-class tax­pay­ers. But some el­e­ments in it would be of par­tic­u­lar ben­e­fit for wealth­ier peo­ple, Mazur said. For ex­am­ple, the es­tate tax ap­plies only to es­tates worth more than $5.49 mil­lion for in­di­vid­u­als or $10.98 mil­lion for mar­ried cou­ples.

“If you’re se­ri­ous about not cut­ting taxes for high­er­in­come peo­ple, you prob­a­bly wouldn’t re­peal the es­tate tax,” Mazur said. Over­all, the plan’s ben­e­fits “largely flow to the top,” he said.

The study also shines a light on the pro­ce­dural strug­gle await­ing a tax pro­posal in Congress. Un­der a ma­neu­ver that Se­nate Repub­li­can lead­ers plan to use to avoid Demo­cratic op­po­si­tion, any tax changes that add to the deficit af­ter a decade must au­to­mat­i­cally ex­pire. The cost of the tax cuts alone would be $13.1 tril­lion in the sec­ond decade, ac­cord­ing to the study.

“There’s a fairly sub­stan­tial rev­enue hole to fill,” Mazur said.

When the Tax Pol­icy Cen­ter ap­plied a “dy­namic” scor­ing method, which ac­counts for eco­nomic growth, the rev­enue cost of Trump’s tax cuts de­creased slightly to $7.7 tril­lion. When fac­tor­ing in the rev­enue-rais­ing mea­sures on a dy­namic ba­sis, the cost is $3.4 tril­lion.

Dy­namic scor­ing can vary de­pend­ing on which model is ap­plied, mak­ing it some­what con­tentious among economists.

Over­all, the study found that if all the cuts and rev­enue-rais­ing mea­sures con­tem­plated by Trump’s out­line were ap­plied, then 70 per­cent of U.S. house­holds would en­joy a tax cut. Un­der the plan, 20 per­cent would see a net tax in­crease.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.