Trump’s am­bi­tious tax plan

Pres­i­dent of­fers few specifics on how to cut rates

Sun Sentinel Palm Beach Edition - - FRONT PAGE - By Jim Puz­zanghera Wash­ing­ton Bureau jim.puz­zanghera@la­times.com

Pres­i­dent Don­ald Trump be­gan a week­long push Wed­nes­day for an ex­ten­sive tax code over­haul, in a speech that, other than vow­ing to lower cor­po­rate taxes, was short on specifics. That task, un­der the plan, will be left to con­gres­sional Repub­li­cans. Story,

WASH­ING­TON — In a speech heavy on pop­ulism but al­most de­void of specifics, Pres­i­dent Don­ald Trump on Wed­nes­day launched what the White House said will be an ag­gres­sive push for a tax code over­haul cen­tered on slash­ing the rate paid by com­pa­nies.

“Lower taxes on Amer­i­can busi­ness means higher wages for Amer­i­can work­ers, and it means more prod­ucts made right here in the U.S.A.,” Trump told a crowd at the Loren Cook Co. man­u­fac­tur­ing plant in Springfield, Mo.

Trump pro­vided no new de­tails on a tax plan that he is leav­ing largely to con­gres­sional Repub­li­cans to draft. Ad­vis­ers and law­mak­ers have said it would be un­veiled in the com­ing weeks, based in part on a one-page out­line the ad­min­is­tra­tion re­leased in April.

The pres­i­dent seemed to hedge on one of the few spe­cific pil­lars of that out­line and his ear­lier cam­paign pro­posal — re­duc­ing the U.S. cor­po­rate tax rate to 15 per­cent from 35 per­cent. In a nod to the dif­fi­cul­ties of get­ting a cut that large ap­proved by deficit-wary law­mak­ers, Trump said that the rate would “ide­ally” be low­ered to 15 per­cent.

Trump pro­vided a broad tax vi­sion that he called “the Amer­i­can model” — a mix of pop­ulism, na­tion­al­ism and Rea­gan-es­que prom­ise of broad-based ben­e­fits flow­ing from the top down — de­signed to lead to “one glo­ri­ous Amer­i­can des­tiny.”

The goal is to end “the crush­ing tax bur­den on our com­pa­nies and our work­ers,” Trump said.

Trump laid out four fa­mil­iar prin­ci­ples for a tax over­haul: Sim­pli­fy­ing the code by elim­i­nat­ing un­spec­i­fied “spe­cial in­ter­est loop­holes”; slash­ing the tax rate paid by busi­nesses; pro­vid­ing tax re­lief for mid­dle­class fam­i­lies; and chang­ing the way the U.S. treats for­eign earn­ings to bring cor­po­rate money home from over­seas.

But Trump didn’t ex­plain how he planned to ac­com­plish those and didn’t ad­dress how he would cut tax rates with­out ex­ac­er­bat­ing the fed­eral bud­get deficit.

The Repub­li­cans on Capi­tol Hill on whom he is re­ly­ing are them­selves di­vided over some de­tails, which ex­plains why they also have not pro­duced a tax bill de­spite con­trol­ling Congress since Jan­uary 2015.

Cut­ting rates and over­haul­ing the tax code was a ma­jor cam­paign prom­ise for Trump and con­gres­sional Repub­li­cans in 2016, and their aim is to ac­com­plish that by the end of 2017.

But they face a daunt­ing task as they are run­ning out of leg­isla­tive days this year.

The last ma­jor tax over­haul, signed by Pres­i­dent Ron­ald Rea­gan in 1986, took a year and a half to push through Congress.

Se­nate Demo­cratic leader Chuck Schumer said Wed­nes­day that Trump won’t suc­ceed with a pop­ulist pitch for his yet-to-be re­leased tax plan if he sticks to his prom­ises to make changes that an­a­lysts have said will mostly ben­e­fit cor­po­ra­tions and the wealth­i­est 1 per­cent of wage earn­ers.

Schumer said Democrats would work with Trump and Repub­li­cans, but would not sup­port any plan that cuts taxes for the top 1 per­cent of earn­ers, forces the mid­dle class to pay more taxes or in­creases the fed­eral bud­get deficit.

“Through­out his first seven months in of­fice, the pres­i­dent’s re­peat­edly talked a good game when it comes to the work­ing class,” Schumer said. “But just about ev­ery­thing he’s done has ben­e­fited the wealthy spe­cial in­ter­ests.”

The gen­eral out­lines of Trump’s plan were made pub­lic in April on a sin­gle page with 19 bullet points.

It called for slash­ing the cor­po­rate tax rate to 15 per­cent, a level that even many Repub­li­cans be­lieve is un­re­al­is­ti­cally low given the rev­enue that would be lost.

The ad­min­is­tra­tion also wants to ap­ply the new rate to small mom-and-pop busi­nesses that file through the in­di­vid­ual tax code, but crit­ics say that would also ben­e­fit large part­ner­ships, such as hedge funds, law firms and some of Trump's own busi­nesses.

Trump noted Wed­nes­day, as crit­ics of the tax code often do, that the U.S. cor­po­rate rate is “dead last” among in­dus­tri­al­ized na­tions.

“We have to­tally sur­ren­dered our com­pet­i­tive edge to other coun­tries,” Trump said. “We’re not sur­ren­der­ing any more.”

But many com­pa­nies pay a lower cor­po­rate rate by us­ing de­duc­tions in the tax code.

And while the cor­po­rate tax rate is the high­est of the 35 ad­vanced economies in the Or­ga­ni­za­tion for Eco­nomic Co­op­er­a­tion and De­vel­op­ment, the over­all U.S. tax bur­den is among the low­est.

U.S. tax rev­enue as a share of to­tal eco­nomic out­put was 26 per­cent in 2014, the fourth-low­est among OECD na­tions.

The April plan would nearly dou­ble the stan­dard de­duc­tion and re­duce the num­ber of per­sonal in­come tax brack­ets from seven to three, with the top rate for in­di­vid­ual tax­pay­ers de­clin­ing to 35 per­cent from 39.6 per­cent.

In ad­di­tion, Trump wants to re­peal the es­tate and al­ter­na­tive min­i­mum taxes, two changes that would mostly ben­e­fit wealthy peo­ple.

To help off­set the lost rev­enue from the tax cuts, the White House wants to elim­i­nate “spe­cial in­ter­est” tax breaks that it mostly has not iden­ti­fied.

One break the White House has tar­geted for elim­i­na­tion is the abil­ity for tax­pay­ers to deduct pay­ments they make for state and lo­cal taxes. White House and con­gres­sional Repub­li­cans also are con­sid­er­ing putting new lim­its on the de­duc­tion for home mort­gage in­ter­est.

Both of those changes would be a ma­jor hit to Cal­i­for­ni­ans and res­i­dents of other states with high taxes, pricey real es­tate and wealth­ier earn­ers. Most of those states voted Demo­cratic in the 2016 pres­i­den­tial elec­tion.

JIM WAT­SON/GETTY-AFP

Pres­i­dent Don­ald Trump pushes his “Amer­i­can model” plan to over­haul the tax code Wed­nes­day in Springfield, Mo.

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