Stressing that it is a “first draft” and a list of core principles that will inform necessary legislation, officials on Wednesday released a long-awaited overview of the Trump Administration’s tax plan.
The plan, in its current form, is a one-page hand-out that itemizes several of President Donald J. Trump’s campaign promises. Among the bullet points:
Reducing the corporate tax rate to 15 percent.
Eliminating the estate tax.
Creating a one-time tax on repatriated company assets (the tax rate for those arrangements has not yet been announced).
In a bid to attract international business, shifting the U.S. to a “territorial” tax system where companies only pay U.S. taxes on domestic profits.
Repealing the 3.8 percent Obamacare tax on corporations.
A reduction to three personal tax brackets (10 percent, 25 percent and 35 percent) from the existing seven.
Doubling the standard deduction.
Eliminating the alternative minimum tax and most tax deductions (although specifically preserving mortgage interest and charitable contribution deductions).
“As we all know job creation and economic growth is the top priority of the administration,” Gary Cohn, White House chief economic advisor, said during a press conference to announce the plan. “Nothing drives economic growth like capital investment. Therefore we are going to return the top capital gains tax rate and dividend rate to 20 percent, repealing the harmful 3.8 percent Obamacare tax on dividends and capital gains. That tax has been a direct hit on investment income and small business owners.”
“We are going to repeal the death tax,” he added. “The threat of being hit by the death tax leaves small business owners and farmers in this country to waste countless hours and resources on complicated estate planning to make sure their children aren’t hit by a huge tax when they die.”
Cohn predicted that the plan will be “attacked by the left and the right, likely perhaps at their own peril because he “would never bet against this President.”
“We’ve been working on this plan for a very considerable period of time,” said Treasury Secretary Steven Mnuchin. “Our objective is to make U.S. businesses the most competitive in the world. Right now we have a 35 percent corporate rate on worldwide income and deferral. It is perhaps the most complicated and uncompetitive tax rate in the world. It is not a surprise hat companies leave trillions of dollars offshore.”
“Under the Trump plan we will have a massive tax cut for businesses and massive tax reform and simplification,” he added. “We will have a one-time tax on overseas profits, which will bring back, to be invested here, trillions of dollars that are offshore…The president is determined to unleash economic growth for businesses.”
Among those weighing in on the plan is the Information Technology and Innovation Foundation, a science- and tech-policy think tank.
“While some of the provisions are critical for boosting U.S. economic growth, like a lower corporate tax rate and a so-called ‘territorial’ system for taxing companies’ foreign profits, the plan is silent on many other key measures that are necessary to boost productivity and competitiveness,” says Joe Kennedy, a senior fellow at ITIF, and former chief economist at the Commerce Department.
“Critically, the plan also would add trillions of dollars to the deficit over the next decade, an issue the administration further aggravates by proposing to cut taxes on so-called ‘pass-through’ businesses,” he adds. “The unfortunate effect of these flaws will be to divert attention away from other proposals that have a greater chance of passing Congress, which will slow progress toward much-needed tax reform to boost the U.S. economy.”
Earlier this year, ITIF issued a report spelling out key provisions that any tax reform should include. The Trump plan has a mixed record on these, it says. Lowering the corporate rate to 15 percent and moving the U.S. to a territorial system will immediately make it a more attractive place to do business.
“Perhaps even more important, a lower rate will reverse the incentives to move profits abroad through so-called ‘inversions’ or transfer-pricing agreements,” the report adds. The one-time tax on past earnings that are currently parked abroad “will produce hundreds of billions in tax revenue and remove any incentive to keep the money overseas in the future.”
A more succinct response came from a group calling itself the Patriotic Millionaires, 200 high-net-worth Americans “committed to building a more prosperous, stable, and inclusive nation.”
“Patently absurd,” the group wrote, later noting that Steve Schwarzman, a top economic advisor to the Trump Administration, has called them “traitors to their class” for their views on the economic system.
“We have a rigged economy designed to benefit the wealthiest Americans and large corporations,” Sen. Bernie Sanders (D-Vt.) wrote on Twitter. “Trump’s tax plan would make that system worse.”