Deep rate cuts for businesses in president’s tax proposal

Plan recalls trickle-down economics theory of 1980s

Dismissing concerns about ballooning federal deficits, President Donald Trump on Wednesday proposed dramatic tax cuts for U.S. businesses and individuals — outlining an overhaul his administration promises will spur economic growth and simplify America’s tangle of tax code rules.

His proposal, a one-page sketch short on detail, would reduce the top corporate tax rate by 20 percentage points and allow private business owners to claim the new lower rate for their take-home pay. It would whittle the number of tax brackets for individuals from seven to three, lower the top tax rate from 39.6 percent to 35 percent and double the standard amount taxpayers could deduct.

It would eliminate the estate

tax and reduce taxes on investments, typically paid by the rich. It would further reduce the tax burden for the wealthy by eliminating the catch-all alternative minimum tax, which takes an additional bite out of highincome Americans.

More lower-income Americans would pay no

tax at all, and there would be relief — still undefined — for families with child care expenses.

The plan does not propose any budget cuts or tax increases that might offset the lost revenue, a choice that alarms some fiscal conservatives in Trump’s party who have spent years railing about the dangers of deficit spending.

It also does not fully embrace tax proposals backed by Republican House

Speaker Paul Ryan, an essential ally if the president is to make good on his promise to deliver a tax overhaul that creates growth and brings jobs to struggling parts of the country.

The president’s proposal marks a rehash of an economic theory popularized in the 1980s. Trump officials essentially argue that benefits from the tax cuts will trickle down from higher profits for companies into stronger pay raises

for workers and greater consumer spending. This expected surge in growth, in theory, would be enough to keep the federal budget deficit from shooting upward.

Some economists agree, but most budget experts say it’s unlikely.

Despite the details provided Wednesday, the proposal leaves significant open questions that could affect its impact on taxpayers and the economy.