| In new tax plan, Trump promises to do what Reagan couldn’t |
| The president’s advisers touted the proposed tax cuts as the start of an economic renaissance that would supercharge the U.S. economy and pare the federal debt, but economists were very skeptical that the plan could deliver the level of growth Trump promised. |
| By Max Ehrenfreund • Read more » |
- The president’s team offered few key details on how he would accomplish the effort. Damian Paletta reports: “The one-page outline pinpointed numerous changes he wants to make – among them, replacing the seven income tax brackets with three new ones, cutting the corporate tax rate by more than 50 percent, abolishing the alternative-minimum tax and estate tax, and creating new incentives to simplify filing returns. But the White House stopped short of answering key questions that could decide the plan’s fate. For example, Trump administration officials didn’t address how much the plan would reduce federal revenue or grow the debt. They also didn’t specify what income levels would trigger inclusion in each of the three new tax brackets. The goal, White House officials said, was to cut taxes so much and so fast that it led to immediate economic growth, creating more jobs and producing trillions of dollars in new revenue and wealth over the next decade…
“Despite its brevity … the document marked the most pointed blueprint Trump has presented Congress on any matter. [Now], the plan must navigate a legislative and political gauntlet on Capitol Hill that has killed numerous other efforts to rework the tax code.” And business groups were already squaring off: The National Association of Realtors called the proposal a ‘non-starter,’ alleging that it would remove tax incentives for people to buy homes because of changes it would make to certain tax deductions. The U.S. Chamber of Commerce, by contrast, issued a statement saying the plan would ‘help drive job creation, investment, and economic growth.’”
-- Trump is promising to do what Reagan and both Bushes couldn’t. Max Ehrenfreund analyzes the proposal: “His advisers say that the plan will pay for itself. But in the experience of two other Republican presidents, Ronald Reagan and George W. Bush, tax cuts produced an uneven record on prompting economic growth. And in both instances, reductions in taxes failed to pay for themselves and, instead, left the nation to deal with increasing federal debt. After his 1981 tax cut, Reagan was forced to raise taxes several times. And Bush’s tax cuts put the nation on vulnerable fiscal footing, depriving the government of revenue as the United States waged two wars and faced a financial crisis. Ultimately, Congress and [Obama], after several standoffs over federal finances, hiked taxes by billions of dollars and imposed strict limits on government spending. [Now], economists fear it will happen again. ‘This is definitely not in pays-for-itself territory,’ Alan Cole, an economist at the conservative Tax Foundation, said of Trump’s plan.”
-- Treasury Secretary Steven Mnuchin admitted that Trump “has no intention” of actually releasing his tax returns,despite repeatedly promising the American people he would do so. “The president has released plenty of information, and I think has given more financial disclosure than anybody else,” he told reporters in a news conference Wednesday (this is totally untrue). “I think the American population has plenty of information.” ( Philip Rucker)
-- Without Trump’s returns, we cannot know exactly how much he’d benefit from his proposal. But there is no doubt that the plan would slash taxes on hundreds of Trump-owned real estate, licensing and other companies, many of which qualify as pass-through businesses. Drew Harwell and Jonathan O'Connell report: “A copy of Trump’s tax return from 2005 suggests that a tax cut similar to the one Trump is proposing could have lowered his tax obligation by potentially tens of millions of dollars in a single year. The White House said it would create rules to prevent wealthy individuals and corporations from taking advantage of the low pass-through rate. But because they did not provide details, it’s difficult to know how those rules would apply to the Trump companies. ‘Trump is the king of pass-throughs,’ said Steven M. Rosenthal, a senior fellow at the nonpartisan Tax Policy Center. ‘He has pass-through businesses everywhere. This is a very large issue.’”
-- House Democrats plan to force a floor fight with Republicans today over legislation that would require Trump to disclose information about his personal taxes, business holdings, ethics waivers, and visitors to the White House and his vacation properties. Ed O’Keefe reports: “Responding to the deep opposition to Trump, Democrats for the first time will use the legislative process to try tying congressional Republicans to Trump’s decisions to withhold information about his personal wealth, business dealings with the federal government and visitors to the White House and Mar-a-Lago … During debate and votes on unrelated legislation, aides said Democratic lawmakers plan to use procedural gimmicks to try forcing a vote on a bill by Rep. Katherine M. Clark (D-Mass.), who represents suburban Boston. Given their control of the chamber, Republicans are likely to step in and either block consideration of the legislation or hold a vote that outright rejects it. Then, Democrats could begin attacking vulnerable GOP incumbents as supportive of Trump … The bill also would force Mnuchin to provide the House Ways and Means Committee with copies of Trump’s tax returns from 2007 through 2016 that would be reviewed in a closed executive session.”
-- Most top House Republicans privately say Trump’s tax framework is fundamentally unserious. Many also see it as disruptive to their own process, which they’ve been thinking about and working on for years. "It's not tax reform. Not even close,” a senior GOP aide told CNN last night. “It's really easy to talk about big cuts. We're about solutions. They aren't to that point yet, either on the policy or on the personnel level, and it's both obvious and disruptive to the process."
-- During a panel discussion with other experts last week, which aired on C-SPAN 2 but got little pick-up in the mainstream press, one of Ryan’s top aides called the idea of enacting a temporary business tax cut through the reconciliation process a “magic unicorn running around.”
"Not only can that not pass Congress, it cannot even begin to move through Congress,” George Callas, Ryan's senior tax counsel, said at the Institute of International Finance event. “A plan of business tax cuts that has no offsets, to use some very esoteric language, is not a thing. It’s not a real thing! And people can come up with whatever plans they want. Not only can that not pass Congress, it cannot even begin to move through Congress. … And there are political reasons for that. Number one, members wouldn’t vote for it. But there are also procedural, statutory and legal reasons why that can’t happen.”
Callas spoke candidly about the problems of trying to pass tax reform with only 51 votes in the Senate, as opposed to 60 votes. To do permanent reform, under the rules, the measure cannot increase the deficit after a decade. “A corporate rate cut that is sunset after three years will increase the deficit in the second decade. We know this. Not 10 years. Three years. You could not do a straight-up, un-offset, three-year corporate rate cut in reconciliation. The rules prohibit it. You might be able to do two years. A two-year corporate rate cut … would have virtually no economic effect. It would not alter business decisions. It would not cause anyone to build a factory. It would not stop any inversions or acquisitions of U.S. companies by foreign companies. It would just be dropping cash out of helicopters onto corporate headquarters.”
Consider one element of the tax reform proposal he rolled out this week. Ending the deduction for state and local taxes, which allows individuals to subtract their home-state levies from their federal taxable income, would disproportionately hurt people who live in blue states and not make much difference for his voters in red states. “That move was a major shift for Mr. Trump, who (as a New Yorker) previously had called for capping deductions but not killing the break,” the Wall Street Journal’s Richard Rubin reports. “It would shift the tax burden from low-tax states such as Texas and Florida to high-tax states such as New York and New Jersey. … Democrats mobilizing to defend the deduction are in the awkward position of standing up for a tax measure that helps some of the highest-income Americans—the same people they typically say don’t pay enough in taxes.”
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