In yet another public relations move, President Trump unveiled a tax reform plan on Wednesday that said little, promised much, and left nearly everyone wanting more than was given; and, in fact was on a single page memo what was described (there was a notable absence of charts and graphs) were mostly retreads from the campaign. At its best it showed that the “so-called” reform highlighted the president’s determination to give tax breaks to the wealthy, while middle-class and working families received nearly zero benefits.
Treasury secretary Steve Mnuchin and Gary Cohn, director of the National Economic Council, claimed that the proposal was the “most significant tax reform since 1986” and that it would pay for itself, with a 3 percent increase in the national economy., yet others were not so sure, among them Bernard Baumohl, chief global economist of the Economic Outlook Group, who said, that it was conceptually flawed, and “unlikely to go far in Congress.”
If the devil is indeed in the details, as convention would have it, then there were scant few; but chief among them was a shrinkage in the individual tax rates from seven to three, respectively, 10, 25 and 35 percent. Businesses large and small would see their overall rates slashed to 15 percent. This is a move that many have welcomed as most corporations in Western Europe pay far less.
In her national column, columnist Gail MarksJarvis predicted that “it's bound to be controversial because most savings wold go to the highest-income people, and 20 percent of moderate-income people would face higher taxes.”
Candidate Trump told the AARP in their bulletin, “Aside from dramatically streamlining personal income tax by removing carve-outs for special interests and reducing the number of brackets, we will seek to eliminate the alternative minimum tax and the death [estate] tax. The centerpiece of our tax-reform effort will be on the corporate side, where will lower the rate to 15 percent, allow repatriation of offshore capital at 10 percent, stop taxing returned earnings from overseas that have already been taxed, and allow 100 percent expensing for businesses. These reform will apply to all business enterprise, not just the largest corporate giants.”
Part of the proposal is the long cherished desire by Trump to eliminate the estate tax and the alternative minimum tax --- known as the AMT -- which in the partial pages of his 2005 tax return, (given to political television host Rachel Maddow), showed that without it he would have paid far less in taxes than the $31 million that he did pay. The AMT limits the amount of deductions, and other benefits available to the wealthy
Puzzling for a president that touted “America First” as a campaign slogan, corporations would not have to pay taxes on their foreign profits. Even more baffling is a one time opportunity to bring home cash that is held in reserves overseas, without provisions, or regulations.
In an unwelcome shock to real estate agents and homebuilders, that they see as disincentive to home buying, Trump proposes to “double the standard deduction for individuals, essentially eliminating taxes on around $24,000 of a couple's earnings,” reported The New York Times.
Even more controversial is the desire to remove the deduction of the cost of state and local tax payments, a real benefit for those that live in high tax states, like New York and California, that also happen to have Democratic majorities. In fact. Crain’s New York Business acknowledged, “that provision especially benefits New Yorkers because city and state tax rates are so high here. It allows the average filer to deduct roughly $20,500 annually from his or her federal taxable income, according to the nonpartisan Tax Policy Center. It is also a significant deduction for many people who live in New Jersey and California, and the Independent Budget Office has estimated that doing away with it would increase New York City residents' taxable income by $28 billion, causing their collective federal tax bill to rise by $8 billion a year.”
CNYB also reported that Lily Batchelder, a New York University professor and former deputy director at the White House's National Economic Council, “described Trump's cuts as "immensely costly" and "heavily focused on the wealthy" while raising taxes on "millions of working class families."
As reported before, Trump also wants to delete the 3.8 percent tax that helps fund low income beneficiaries of Obamacare, and funnel what is expected to be trillions, to help fund the cuts to wealthy and corporate tax beneficiaries; which is in this bill.
House Republicans wanted to pay for any tax cuts with a new tax on imports, but this is not part of the plan, but was floated by Speaker of the House, Paul Ryan, in January, to “scrap a tax deduction on imported goods” that could have meant “as much as 15% on products from jeans to Jeeps,” reported USA TODAY, responding to a query to the National Retail Federation.
White House officials have not said how the proposals would address the deficit, but of particular concern is that wealthy individuals could use the new tax rate, by misappropriating it to personal income, reducing from 39.6 percent to 15 percent, creating a pass though to avoid paying the higher rate. To which Minority House Leader Chuck Schumer said, “That’s not tax reform, That’s just a giveaway to the very, very wealthy that will expand the deficit.”
Despite the much trumpeted influence of first daughter, Ivanka Trump, to include credits for child care, these are not seen in the document.
Senate Finance Ranking Committee Member Ron Wyden said in a statement from Washington on Wednesday: “This is 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. Instead of providing a real tax reform plan as promised, this administration is offering cakes to the fortunate few. Instead of focusing on lowering takes for teachers, nurses and cops, Trump appears to be piling on the conflicts of interest by ensuring he himself will receive an elite giveaway. Yet another reason why it’s critical the American people see his tax returns.”
It also may be a Congressional hurdle that may be another defeat for Trump whose ratings have slipped substantially in how the public feels that he can accomplish his goals, sliding from 17 points in February, according to a recent Gallup poll released last Tuesday.
“The Tax Policy Center says the plan would cost the government $6 trillion over a decade as people pay less in taxes. Unless the government makes huge spending cuts, the tax break would end up increasing the national debt by nearly 80 percent of gross domestic product by 2036,” MarksJarvis reported.
Congress fresh from their recent recess has a lot of work ahead. Stay tuned.
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