Tax plan met by skepticism
Lawmakers wonder how Trump plans to pay for big cuts
Trump’s broad-brush overview, intended to serve as an opening bid with Congress, has lawmakers questioning howthe president plans to pay for substantial cuts.
WASHINGTON — Racing to convey a sense of momentum to President Donald Trump’s legislative agenda, the White House unveiled a plan for what it called “one of the biggest tax cuts in American history” Wednesday, just ahead of the administration’s symbolic first 100 days in office.
The one-page outline, touted as an overhaul of the tax code, bears the hallmark of other early Trump proposals: a broad-brush overview of bold goals that is intended to serve as an opening bid with Congress rather than a fully baked policy proposal.
The plan was immediately met with skepticism from budget groups, and it faces a daunting future on Capitol Hill. Lawmakers from both parties are wary that the White House hasn’t said how it would pay for the cuts, which likely would provide the greatest benefits to higher-income earners and corporations.
At its center is a large reduction in corporate tax rates, to 15 percent — from multinational corporations to mom-and-pop shops. The current U.S. corporate tax rate is 35 percent.
The plan also reduces the number of personal income tax brackets from seven to three, with rates of 10 percent, 25 percent and a top rate of 35 percent.
The outline released by the White House lacks many basic details, including income requirements pegged to new tax brackets or any analysis of how much it would increase the national debt.
The proposal also would eliminate the inheritance tax on multi-million-dollar estates and cut a 3.8 percent tax on investment income imposed as part of Obamacare.
It would eliminate the alternative minimum tax, a backstop intended to prevent the highest earners from using deductions and other strategies to avoid paying substantial taxes.
It would also double the standard deduction, meaning married couples would not pay taxes on their first $24,000 in income.
“This tax reform package is about growing the economy, creating jobs,” said Gary Cohn, director of Trump’s National Economic Council, who presented the plan at the White House briefing with Treasury Secretary Steven Mnuchin.
The plan is sure to meet resistance and refinement on Capitol Hill, among Democrats who oppose heavy tax breaks for high earners and corporate interests, Republicans who worry about the deficit, and lobbying interests concerned with the potential loss of favored deductions.
Democrats and some outside groups also complained that the proposal would chiefly benefit wealthy Americans like Trump personally, rather than middle-class wage earners.
In response to a question, Mnuchin said Trump had no intention of releasing his tax returns, further slamming the door on a dispute that has persisted since the campaign.
Trump and his advisers cast the plan as a historic and long-overdue opportunity to rewrite tax laws that have grown increasingly complicated since the last major rewrite in 1986 under President Ronald Reagan.
“This isn’t going to be easy. Doing big things never is,” Cohn said. “We will be attacked from the left and we’ll be attacked from the right, but one thing is certain: Iwould never, ever bet against this president. He will get this done for the American people.”
If the plan does not pay for itself, it would need support from at least some Democrats under current Senate rules. Some were quick to denounce it on Wednesday.
Sen. Ron Wyden of Oregon, the top Democrat on the Finance Committee, called the proposal “an unprincipled tax plan that will result in cuts for the 1 percent, conflicts for the president, crippling debt for America and crumbs for the working people.”
Mnuchin said of the administration proposal: “We will beworking very closely … with the House and the Senate to turn this into a bill that can be passed and the president can sign.”
Republican leaders on Capitol Hill issued a joint statement Wednesday that fell short of an endorsement but said Trump’s proposals will “serve as critical guideposts for Congress.”
Trump’s advisers argued that the plan will pay for itself through economic growth. But most economists dispute that analysis, which could put Trump at odds with long-held Republican promises to trim the deficit.
The non-partisan Tax Policy Center estimated that Trump’s campaign tax plan, which includes eliminating the alternative minimum tax and other changes along with the tax cut to corporations proposed Wednesday, would reduce federal revenue by $7.2 trillion over the first decade.
Democrats and many budget analysts are skeptical that Trump can slash business taxes without causing budget deficits to soar.
“We definitely need tax reform as away to grow the economy,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget.
“What I don’t want to see is that this tax reform is going to be paid for by magic,” she said.
Steven M. Rosenthal, a senior fellow at the Urban-Brookings Tax Policy Center, predicted that wealthy and sophisticated taxpayers would exploit the drop on the corporate tax rate to pay less in taxes on their income.
“The middle and working class cannot,” he said. “This piece of their plan will exacerbate inequality— and increase complexity.”
But some conservative groups applauded. Americans for Prosperity called it “a giant leap forward.”