I don’t think this can pass. I would dearly love to be wrong. Short of a flat tax this is about as good as you can get.
The White House is proposing comprehensive reforms to the tax code that would wipe out most deductions and and simplify the system for individuals into three tax brackets.
The plan unveiled Wednesday would cut the top personal income tax rate from 39.6 percent to 35 percent and double the standard deduction for taxpayers to $24,000.
The plan would also lowers the tax rate for corporations and most small businesses to 15 percent, more than halving the current 35 percent corporate rate.
“It’s a great plan,” Trump said during an executive order signing at the White House. “It’s going to put people back to work.”
The White House plan follows many of Trump’s campaign pledges, and came in the form of a set of principles with few details. But the plan is designed to be the starting point of a major push to pass a major tax reform package this year.
“Tax reform is long overdue,” National Economic Council Director Gary Cohn told reporters at the White House. “We have a once-in-a-generation opportunity to do something really big.”
Parts of the outline are similar to the plan from House Republicans, though it does not include a controversial border adjustment tax that would pay for the reforms by imposing a new tax on imports.
The plan would repeal taxes that mostly affect wealthy Americans, such as the Alternative Minimum Tax (AMT) for individuals and the estate tax. But it would also “eliminate targeted tax break that mainly benefit the wealthiest taxpayers,” according to the one-page outline released Wednesday.
The outline also vows to provide “tax relief for families with child and dependent care expenses” — an idea championed by Ivanka Trump — without specifying how.
Trump’s proposal includes a one-time tax on corporate profits overseas that would allow companies to repatriate funds to the United States, something business believes would spark new investments.
It would also eliminate all tax deductions for individuals aside from mortgage interest and charitable tax deductions, according to Treasury Secretary Steven Mnuchin.
This would include getting rid of the Earned Income Tax Credit, which is a sizable tax giveaway to the poor. Democrats will have a rhetorical field day attacking Trump for “tax breaks to the rich while working people starve,” and such similar idiocies. It might – it likely will – be enough to frighten Republicans in the House away from pushing a tax proposal to passage.
Trump might have to agree to throw the EITC back into the pile in order to sweeten this thing for the squishes. He might well have to do it to keep the Democrats from filibustering it in the Senate as well, though there is Democrat support for a rollback of the corporate tax rates – even the economic illiterates in the Democrat Party recognize that having the highest corporate tax rates in the civilized world is a bad place to be.
Even then, I’m skeptical. Death taxes seem to be a religious sacrament on the Left for some reason, and this eliminates them. Whether Chuck Schumer and his people would make that a hill to die on I don’t know. And one would suspect Schumer, et al would be a bit worried about going into the 2018 midterms where they’re so badly exposed, holding some 25 of the 33 seats up for re-election, including 10 of them in red states, with the public knowing they’re the ones standing in the way of a massive economy-boosting tax cut.
Schumer and the gang are going to point to the CBO score of this plan, which is going to say it will grow the debt by trillions of dollars in the next 10 years – that you can guarantee. It won’t, at least probably not, because the CBO will score the plan based on a static accounting of the economy and the entire point of a big across-the-board tax cut like this is to grow the economy. This tax cut will spark economic activity, probably in a major way, but CBO’s budget scoring of it won’t account for that. And Trump will be accused of blowing a hole in the budget, and the Democrats will then make demands for tax increases elsewhere to fill the hole.
Hopefully the president and his people are prepared for that, and hopefully the message in response is about economic growth and a reduction of the size and scope of government. There is an economic case to be made about increasing the standard of living for working people, applying upward pressure to wages by freeing up business capital, attracting investment into the American economy, restarting the failing engine of entrepreneurship and reversing the awful trend during the Obama administration in which there were fewer businesses extant in each of Obama’s years in office than the previous year and launching a sizable economic boom which takes people off welfare rolls and makes them taxpayers, and the salutary budgetary effects of such a vision.
Trump needs to make it. That vision is what most of the people who voted for him wanted from him in the first place. He might need to horse-trade to get this done, but here is his opportunity to close a sale with the American people.