Tax cut plan lacks specifics
Analysts can’t gauge effect on the deficit
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.