Trump’s tax cuts mes­sage falls flat on mid­dle class

Cor­po­rate rate a hard sell

The Washington Times Daily - - FRONT PAGE - BY S.A. MILLER

Pres­i­dent Trump’s team is work­ing over­time to con­vince Amer­i­cans that the Repub­li­can tax re­form plans, which tilt de­cid­edly to­ward low­er­ing rates for busi­nesses, will be a boon for mid­dle-class fam­i­lies.

The mes­sage for the most part has failed to take hold out­side Repub­li­can con­fer­ence rooms on Capi­tol Hill. Even some hard-core Trump sup­port­ers aren’t buy­ing it.

“Maybe Repub­li­cans aren’t mak­ing that case strong enough,” Her­itage Foun­da­tion tax pol­icy an­a­lyst Stephen Moore told The Wash­ing­ton Times.

“A busi­ness tax cut is a mid­dle-class tax cut,” he said. “The whole rea­son we want to cut the busi­ness taxes is to ben­e­fit work­ers so that there are more jobs, higher wages, more com­pa­nies come back to the United States. It’s all about mak­ing the Amer­i­can econ­omy more com­pet­i­tive, which ben­e­fits the

mid­dle class.”

Mr. Moore helped write Mr. Trump’s tax plan dur­ing the pres­i­den­tial cam­paign. The orig­i­nal pro­posal in­cluded a deeper cut to the cor­po­rate rate and big­ger re­duc­tions across tax brack­ets for in­di­vid­u­als. Those cuts added up to about $3 tril­lion in lost rev­enue and needed to be trimmed and re­shaped to fit into the $1.5 tril­lion hole con­gres­sional Repub­li­cans al­lowed in the bud­get.

Mr. Trump orig­i­nally pro­posed re­duc­ing the cor­po­rate rate from 35 per­cent to 15 per­cent. He in­sisted that the House and Sen­ate give him at least a 20 per­cent rate.

As a re­sult, the House Repub­li­can bill gave more than 70 per­cent of the $1.4 tril­lion in tax cuts to busi­ness and the Sen­ate Repub­li­can bill gave nearly 60 per­cent, ac­cord­ing to an anal­y­sis by The Times.

The busi­ness tax cuts in­clude the 20 per­cent rate for cor­po­ra­tions and a cut in the rate paid by small busi­nesses that file through the in­di­vid­ual side of the tax code.

Repub­li­cans say those busi­ness tax cuts will end up help­ing av­er­age Amer­i­cans too.

A typ­i­cal fam­ily with an in­come of about $60,000 would get a tax cut of $1,182 un­der the House bill, Repub­li­cans said. But adding in higher wages from an econ­omy su­per­charged by lower taxes and reach­ing 3.5 per­cent growth, an av­er­age mid­dle-in­come house­hold would get an ex­tra $1,400, rais­ing their af­ter-tax in­come by nearly $2,600.

“I al­ways viewed the busi­ness tax cut as the heart and soul of this plan,” Mr. Moore said.

Re­gard­less, cor­po­rate rate cuts are not pop­u­lar among vot­ers. Just 35 per­cent of Amer­i­can vot­ers who have seen, read or heard about the tax plan sup­port cut­ting the cor­po­rate tax rate, ac­cord­ing to a Morn­ing Con­sult/Politico poll.

A Reuters/Ipsos poll found that only 8 per­cent of Amer­i­cans be­lieve the tax re­forms will ben­e­fit the mid­dle class. About 32 per­cent said the wealthy will ben­e­fit the most and 14 per­cent said U.S. cor­po­ra­tions will ben­e­fit the most, ac­cord­ing to the poll.

Mr. Trump sig­naled Mon­day that he wanted big­ger tax cuts on the in­di­vid­ual side. In a tweet while trav­el­ing in Asia, he sug­gested adding a re­peal of the Oba­macare man­date to buy health in­sur­ance in the tax re­form bill to pay for more cuts.

The Con­gres­sional Bud­get Of­fice es­ti­mated that elim­i­nat­ing the man­date would pro­vide about $338 bil­lion in sav­ings over 10 years, which Repub­li­cans could use to lower tax rates fur­ther.

“Cut top rate to 35% w/all of the rest go­ing to mid­dle in­come cuts?” the pres­i­dent wrote on Twit­ter.

Some of the re­sis­tance to the tax plan is from mid­dle-class Amer­i­cans who fear they will end up pay­ing more be­cause of the elim­i­na­tion of pop­u­lar in­come tax de­duc­tions such as the one for state and lo­cal taxes.

“I hate the tax plan,” said Sue Payne, a con­ser­va­tive ac­tivist and Trump sup­porter in Mary­land, a high-tax blue state where res­i­dents could feel the pinch if they lose the de­duc­tion.

“It’s really go­ing to kill peo­ple like me. This is bad for the mid­dle class,” she said. “The Repub­li­cans are wrong on this, ab­so­lutely wrong on this. And for the first time in my life that I can re­mem­ber, I’m agree­ing with Democrats.”

She didn’t blame Mr. Trump. She blamed his ad­vis­ers and Repub­li­can law­mak­ers.

The White House and Repub­li­can lead­ers ar­gue that the nearly dou­bling of the stan­dard de­duc­tion to $12,000 for in­di­vid­u­als and $24,000 for mar­ried cou­ples fil­ing jointly will help off­set the loss of pop­u­lar de­duc­tions.

Pro­po­nents of nix­ing the de­duc­tion for state and lo­cal taxes say the sys­tem sub­si­dizes high-tax states such as Cal­i­for­nia, New York and New Jersey. Elim­i­nat­ing these de­duc­tions would force those states to cut taxes, they say.

As a com­pro­mise to shore up sup­port from blue-state Repub­li­cans, the House bill kept a de­duc­tion for lo­cal prop­erty taxes up to $10,000.

Sen­ate Repub­li­cans com­pletely elim­i­nated state and lo­cal tax de­duc­tions.

Mr. Trump’s daugh­ter and se­nior ad­viser Ivanka Trump sided with the House Repub­li­cans’ com­pro­mise, pro­vid­ing a strong in­di­ca­tion of where the White House comes down in the dis­pute.

“House Ways and Means solved that prob­lem in a cre­ative way in al­low­ing prop­erty taxes to be de­ducted. The Sen­ate is still not there,” Ms. Trump said on Fox News’ “Fox & Friends.”

She is part of a team of ad­min­is­tra­tion of­fi­cials dubbed the “Tax Cab­i­net,” which has been tour­ing the coun­try to drum up sup­port for the re­forms.

“The pur­pose of tax re­form is to pro­vide mid­dle-in­come tax re­lief and to en­able our busi­nesses to grow and our econ­omy to grow,” she said.

Ms. Trump vis­ited Maine for a fo­rum Fri­day with Sen. Su­san M. Collins, a mod­er­ate Repub­li­can who has re­sisted Mr. Trump’s agenda and helped de­feat the re­peal of Oba­macare.

Ms. Trump said it was a “good start” that Ms. Collins had the same goals as the pres­i­dent for tax re­form.

“She wants to cre­ate growth. She wants to cre­ate pros­per­ity. She rec­og­nizes that cut­ting cor­po­rate taxes is go­ing to give em­ploy­ers the im­pe­tus to hire more work­ers and it is go­ing to cre­ate wage growth, which is what this coun­try des­per­ately needs and has not had in a very long pe­riod of time,” said Ms. Trump.

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