Tax reform spin cycle will try your patience

If preparing your tax return leaves you dazed and irritated, the coming debate over tax reform will make you long for the simple pleasures of April 15.

Get ready to be pummeled by arguments for and against the White House plan — arguments offered by strident partisans whose only marketable skill, in many cases, is promoting their self-interest. Groups representing business and the wealthy will be some of the most adept spinmeisters.

The little we know so far of President Donald Trump’s plan for massive tax cuts comes from a onepage summary the White House released in April. The number of tax brackets would be reduced from seven to three: 10, 25, and 35 percent. The standard deduction would be doubled. Inheritance taxes would be repealed. Unspecified loopholes benefiting the wealthy would be eliminated.

President Trump, who has yet to share his tax returns, promises his plan will increase jobs, boost the economy, and help the middle class.

New details were revealed last month when Mr. Trump spoke in Missouri, where he proposed allowing companies storing profits offshore — where the funds aren’t taxed — to repatriate an estimated $2.5 trillion at a reduced tax rate. The president promised, “We can return trillions and trillions of dollars to our economy and spur billions of dollars in new investments in our struggling communities and throughout our nation." Let the games begin. Proponents of a tax holiday on offshore profits that was enacted in 2004 — part of the inappropriately named American Jobs Creation Act — vowed it would create more than 500,000 jobs and increase business investment by 2 percent to 3 percent over two years.

That didn’t happen. The Congressional Research Service concluded that most of the largest beneficiaries of the measure cut jobs in 2005-06.

The National Bureau of Economic Research concluded, “Higher levels of repatriations were not associated with increased domestic capital expenditures, domestic employment compensation or research and development expenditures.”

Instead, companies used their lightly taxed offshore profits to increase dividends and buy back shares.

When a similar tax holiday was proposed in 2011, it was opposed by groups as disparate as the Heritage Foundation, which said it would have “a minuscule effect on domestic investment and thus have a minuscule effect on the U.S. economy and job creation,” and the Brookings Institution, which called the idea “a proven failure.”

A broader concern is how Mr. Trump’s tax cuts will be paid for. Will lower taxes boost federal revenue by growing the economy and increasing the tax base — as trickle-down theorists would have us believe — or will billions of dollars have to be slashed from health care, education and maybe even Social Security to pay for them?

The tax cuts President Trump outlined in April could reduce federal revenue by as much $7.8 trillion over the next decade, according to the Tax Policy Center. If tax increases included in the proposal or mentioned during Mr. Trump’s campaign were enacted, tax reform’s 10-year cost would be reduced to a mere $3.5 trillion, the group said.

Left leaning groups contend Mr. Trump’s promise that tax reform will benefit the middle class is a sham. Frank Clemente, executive director of Americans for Tax Fairness, told reporters on a call