Tax cut plan lacks specifics

An­a­lysts can’t gauge ef­fect on the deficit

The Republican Herald - - OPINION -

Pres­i­dent Don­ald Trump and some con­gres­sional Repub­li­cans un­veiled a tax plan Wed­nes­day that can­not be trusted be­cause it lacks de­tails to re­veal its im­pact across the eco­nomic spec­trum.

It meets some ad­ver­tised goals, such as re­duc­ing the num­ber of tax brack­ets from seven to three. But it doesn’t spell out the in­come ranges for the brack­ets, which ul­ti­mately de­ter­mine what peo­ple ac­tu­ally pay.

It would en­sure some mid­dle-class tax re­lief, as promised, by nearly dou­bling the stan­dard de­duc­tion to $12,000 for an in­di­vid­ual and $24,000 for a cou­ple fil­ing jointly.

On the cor­po­rate side, the pro­posal is not so much a re­form as a give­away. It would re­duce the cor­po­rate tax rate from 35 per­cent to 20 per­cent. And, it would not tax cor­po­rate earn­ings from over­seas op­er­a­tions, al­low­ing com­pa­nies to bring home tax free more than $2 tril­lion that they have stashed abroad.

Those as­pects of the plan are based on the tired and dis­proven “trickle-down” the­ory, which holds that cor­po­ra­tions will use the sav­ings to in­crease wages and hire more work­ers — even though his­tory shows that the money goes to cor­po­rate ex­ec­u­tives and in­vestors.

For ex­am­ple, AT&T CEO Ran­dall Stephen­son claimed that the tax rate re­duc­tion in­her­ently would cre­ate more jobs. But as noted by the tax re­form group Pa­tri­otic Mil­lion­aires, AT&T it­self dis­proves the case. From 2008-15 the com­pany paid an ef­fec­tive tax rate of 8 per­cent, while lay­ing off 80,000 peo­ple and pay­ing Stephen­son $124 mil­lion in stock op­tions.

The pro­posal would fur­ther trim from the top by elim­i­nat­ing the es­tate tax, even though the first $11 mil­lion in in­her­i­tance for a cou­ple is ex­empt and the tax ap­plies only to the rich­est tax­pay­ers.

And while gen­er­ally re­duc­ing rates, the pro­posal would in­crease the low­est rate, af­fect­ing the low­est-in­come tax­pay­ers, from 10 per­cent to 12 per­cent.

Be­cause of the lack of specifics, it was im­pos­si­ble for an­a­lysts to pre­dict the pro­posal’s ef­fect on the deficit. The known specifics alone, how­ever, would in­crease the deficit by at least $1.5 tril­lion over 10 years. Repub­li­can “deficit hawks,” who in 2012 de­manded bud­get re­duc­tions equal to the cost of dis­as­ter re­lief for Hur­ri­cane Sandy, sud­denly are nowhere to be found.

So far, pro­po­nents have be­gun to sell the pack­age based on the re­duced brack­ets alone. But those brack­ets are only a glimpse of the over­all im­pact of the pro­posal, which ob­vi­ously takes far too much from the top.

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