Trump plan prom­ises huge tax cuts, but big ques­tions re­main

Ripon Bulletin - - Nation -

WASH­ING­TON (AP) — Promis­ing big tax cuts and a boom­ing econ­omy, Pres­i­dent Don­ald Trump and con­gres­sional Repub­li­cans un­veiled the first ma­jor re­vamp of the na­tion’s tax code in a gen­er­a­tion Wed­nes­day — a sweep­ing, nearly $6 tril­lion tax cut that would deeply re­duce levies for cor­po­ra­tions, sim­plify ev­ery­one’s brack­ets and nearly dou­ble the stan­dard de­duc­tion used by most Amer­i­cans.

Trump de­clared re­peat­edly the plan would pro­vide badly needed tax re­lief for the mid­dle class. But there are too many gaps in the pro­posal to know how it ac­tu­ally would af­fect in­di­vid­ual tax­pay­ers and fam­i­lies, how it would be paid for and how much it might add to the soar­ing $20 tril­lion na­tional debt.

There clearly would be seis­mic changes for busi­nesses large and small, with im­pli­ca­tions for com­pa­nies be­yond U.S. bor­ders. The Amer­i­can mid­dle-class fam­ily of four could take ad­van­tage of a heftier child tax credit and other de­duc­tions but face un­cer­tainty about the rate its house­hold in­come would be taxed.

“Un­der our frame­work, we will dra­mat­i­cally cut the busi­ness tax rate so that Amer­i­can com­pa­nies and Amer­i­can workers can beat our foreign com­peti­tors and start win­ning again,” Trump boasted at a speech in In­di­ana. Democrats pre­dictably felt dif­fer­ently. “Each of these pro­pos­als would re­sult in a mas­sive wind­fall for the wealth­i­est Amer­i­cans and pro­vide al­most no re­lief to mid­dle-class tax­pay­ers who need it most,” Se­nate Mi­nor­ity Leader Chuck Schumer, D-N.Y., said at the Capi­tol.

Some Repub­li­cans, once fis­cally de­mand­ing but now des­per­ate for a leg­isla­tive win after a year­long drought, shrugged off the specter of adding bil­lions to the fed­eral deficit. Fail­ure on taxes, after the col­lapse of health care re­peal, could cost the GOP dearly in next year’s midterm elec­tions with its House ma­jor­ity at stake.

“This is a now-or-never mo­ment,” said House Speaker Paul Ryan, R-Wis., who built his rep­u­ta­tion on tax and bud­get is­sues.

Like­wise, Trump said in In­di­anapo­lis, “This is a once-in-a-gen­er­a­tion op­por­tu­nity.”

But the bit­terly di­vided, Repub­li­can-led Con­gress faces crit­i­cal de­ci­sions on elim­i­nat­ing or re­duc­ing tax breaks and de­duc­tions, with the GOP in­tent on pro­duc­ing a pack­age with­out Demo­cratic votes by year’s end. The last ma­jor over­haul in 1986 was bi­par­ti­san, and Trump was court­ing Democrats. One vul­ner­a­ble in­cum­bent, In­di­ana Sen. Joe Don­nelly, ac­com­pa­nied the pres­i­dent on his trip to In­di­anapo­lis.

Trump and the ar­chi­tects of the Repub­li­can plan in­sist that the over­haul is aimed squarely at ben­e­fit­ing the mid­dle class and wouldn’t fa­vor the wealthy. Still, a cut in the tax rate for Amer­i­cans mak­ing a half-mil­lion dol­lars or more would drop by al­most 5 per­cent­age points as the wealth­i­est sliver of the na­tion reaped tremen­dous ben­e­fits.

Cor­po­ra­tions would see their top tax rate cut from 35 per­cent to 20 per­cent. For a pe­riod of five years, com­pa­nies could fur­ther re­duce how much they pay by im­me­di­ately writ­ing off their in­vest­ments. That’s all part of an ef­fort that Trump said would make U.S. busi­nesses more com­pet­i­tive glob­ally.

The plan would col­lapse the num­ber of per­sonal tax brack­ets from seven to three.

The in­di­vid­ual tax rates would be 12 per­cent, 25 per­cent and 35 per­cent — and the plan rec­om­mends a sur­charge for the very wealthy. But it doesn’t set the in­come lev­els at which the rates would ap­ply, so it’s un­clear just how much change there might be for a typ­i­cal fam­ily or whether its taxes would be re­duced.

“My plan is for the work­ing peo­ple, and my plan is for jobs,” Trump told reporters at the White House. “No, I don’t ben­e­fit . ... I think there’s very lit­tle ben­e­fit for peo­ple of wealth.”

Re­open­ing the de­bate over eco­nomic in­equal­ity that rip­pled through the 2016 pres­i­den­tial cam­paign, the Repub­li­cans’ de­fense of the plan was met with scorn on the op­po­site side.

“Pres­i­dent Trump’s tax plan is morally re­pug­nant and bad eco­nomic pol­icy,” said Sen. Bernie San­ders, I-Vt.

In the ab­sence of de­tails on the plan’s cost, one back-of-the-en­ve­lope es­ti­mate by a Wash­ing­ton bud­get watch­dog es­ti­mated the tax cuts at per­haps $5.8 tril­lion over the next 10 years. The Com­mit­tee for a Re­spon­si­ble Fed­eral Bud­get, a non­par­ti­san group that an­a­lyzes spend­ing and taxes, said Repub­li­cans had only iden­ti­fied about $3.6 tril­lion in off­set­ting rev­enues, mean­ing the cost to the fed­eral deficit could be in the $2.2 tril­lion range.

That’s more than the $1.5 tril­lion debt cost al­lowed un­der a ten­ta­tive agree­ment by Repub­li­cans on the Se­nate Bud­get Com­mit­tee — and the real bat­tles will come as law­mak­ers quar­rel over which tax breaks might be elim­i­nated to help pay the bal­ance.

The plan would nearly dou­ble the stan­dard de­duc­tion to $12,000 for in­di­vid­u­als and $24,000 for fam­i­lies. This ba­si­cally would in­crease the amount of per­sonal in­come that is tax-free.

De­duc­tions for mort­gage in­ter­est and char­i­ta­ble giv­ing would re­main, but the plan seeks to end most other item­ized de­duc­tions that can re­duce how much af­flu­ent fam­i­lies pay.

A bat­tle is al­ready brew­ing among Repub­li­cans over a move to elim­i­nate the de­duc­tion for state and lo­cal taxes, which is es­pe­cially valu­able to peo­ple in high-tax states such as New York, New Jer­sey and Cal­i­for­nia. Repub­li­cans from those states are vow­ing to fight it. The plan also would:

►Re­tain ex­ist­ing tax ben­e­fits for col­lege and re­tire­ment sav­ings such as 401(k) con­tri­bu­tion plans.

►Seek to help fam­i­lies by call­ing for an in­creased child tax credit and open­ing it to fam­i­lies with higher in­comes. The credit cur­rently is $1,000 per child. Also pro­posed is a new tax credit of $500 to help pay for the care of the elderly and the sick who are claimed as de­pen­dents by a tax­payer.

►Elim­i­nate the es­tate tax — paid by those with mul­ti­mil­lion-in­her­i­tances, a boon for wealthy in­di­vid­u­als who in­herit busi­nesses, in­vest­ments and real es­tate. Also slated for elim­i­na­tion is the al­ter­na­tive min­i­mum tax, a sup­ple­men­tal tax for cer­tain in­di­vid­u­als, cor­po­ra­tions and es­tates that en­joy ex­emp­tions that lower their in­come tax bills.

►Al­low com­pa­nies to pay sub­stan­tially lower tax rates, part of an ef­fort to make U.S. busi­nesses more com­pet­i­tive glob­ally. The plan would im­pose a new, lower tax on cor­po­rate prof­its stashed over­seas, and cre­ate a new tax struc­ture for over­seas busi­ness oper­a­tions of U.S. com­pa­nies.

►Give new ben­e­fits to firms in which the prof­its dou­ble as the own­ers’ per­sonal in­come. They would pay at a 25 per­cent rate, down from 39.6 per­cent. This cre­ates a pos­si­ble loop­hole for rich in­vestors, lawyers, doc­tors and oth­ers; ad­min­is­tra­tion of­fi­cials say they will de­sign mea­sures to pre­vent any abuses.

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