WASHINGTON — With the 100-day milestone looming, President Donald Trump presented a tax-reform plan that included what National Economic Council Director Gary Cohn hailed as “one of the biggest tax cuts in American history.”
The Trump plan would cut the top corporate tax rate from 39 percent to 15 percent, double the standard deduction for working families, reduce the current seven tax brackets to three — 10 percent, 25 percent and 35 percent — and repeal the alternative minimum and inheritance taxes.
The “2017 Tax Reform for Economic Growth and American Jobs” plan was printed on a single sheet of paper with no estimate of how many dollars it would save taxpayers or its effect on the $20 trillion national debt. Cohn and Treasury Secretary Steve Mnuchin handed the plan out to reporters during Wednesday’s afternoon press briefing. The one-pager also left out details as to which tax breaks the administration would eliminate and the rate by which Washington would tax overseas profits.
Mnuchin said that the administration would pay for the lower rates by closing tax loopholes, levying a one-time tax on overseas profits repatriated in the United States, spurring economic growth and creating jobs.
“Job creation and economic growth is the top priority of the administration. Nothing drives economic growth like capital investment,” Cohn explained.
Senate Majority Leader Mitch McConnell, Speaker Paul Ryan and other GOP leaders issued a statement that supported the outline: “With an eye toward fairness and simplicity, we’re confident we can rebuild our tax code in a way that will grow our economy, better promote savings and investment, provide our job creators with a competitive advantage, and bring prosperity to all Americans.”
Democrats blast proposal
While Cohn said he hoped Democrats would support the plan, House Minority Leader Nancy Pelosi did not warm to the proposal.
“True to form, President Trump’s tax plan is short on details and long on giveaways to big corporations and billionaires,” she said in a statement. “Instead of focusing on hard-working families as he promised, President Trump’s tax outline is a wish list for billionaires.”
Senate Minority Leader Chuck Schumer added, “At a time when income distribution is getting even worse in America, the president’s outline clearly makes life easier for the wealthy and special interests and makes life harder for the middle class and lower income Americans. It couldn’t come at a worse time.”
But the administration maintained that the elimination of tax loopholes favored by the rich would limit savings for high-income earners.
“Home ownership, charitable giving and retirement savings will be protected,” said Mnuchin, but not other deductions utilized mostly by the wealthy. These would include deductions for state and local tax payments, a change that could alienate support from lawmakers in states such as California and New York with higher state taxes.
“It’s not the federal government’s job to be subsidizing the states,” Mnuchin told the Associated Press.
“It is well known that the United States has the highest corporate income tax rate among the 35 industrialized nations of the Organization for Economic Co-operation and Development,” the Tax Foundation said in 2016.
Mnuchin argued that America’s 35 percent tax rate — “perhaps the most complicated and uncompetitive rate in the world” — is a drag on job creation and investment. By attracting overseas profits and encouraging investment, Mnuchin added, “We believe we can get back to 3 percent or higher GDP (growth) that is sustainable in this country.”
More detail sought
The Center for a Responsible Federal Budget responded, “We applaud the president’s focus on tax reform, but the plan includes far more detail on how the Administration would cut taxes than on how they would pay for those cuts. Based on what we know so far, the plan could cost $3 to $7 trillion — our base-case estimate is $5.5 trillion. Without adequate offsets, tax reform could drive up the federal debt, harming economic growth instead of boosting it.”
Like Mnuchin, former Republican California Gov. Pete Wilson argued that the Trump proposal would pay for itself as corporations pay a one-time tax on overseas earnings, and the economy responds with GDP growth and a “marked increase in employment.”
The Tax Foundation’s Scott Greenberg looked at the one-page proposal and noted, “All in all, the document does not present many details about the administration’s intentions regarding tax reform; in fact, it is less specific than the tax proposal released by the Trump campaign in September 2016. However, the document does indicate some of the administration’s central priorities for tax reform: large rate cuts for U.S. business income, substantial individual income tax reductions, and the curtailment of certain tax preferences.”
“It’s one page. It has about as much detail as you can get in one page,” said Eli Lehrer of the free market think tank R Street. “There’s a lot of stuff I like in there and there’s a lot of stuff to like. But there’s also a lot of unanswered questions.”
In his 2016 “100-Day Plan to Make America Great Again — For Everyone,” Trump put middle-class tax relief and simplification at the top of his legislative agenda. By releasing the one-page plan on Wednesday, Trump can say that he kept to his pledge to fight for tax cuts during his first rushed days in office.
The administration will provide details and numbers after holding listening sessions throughout May, Mnuchin said.
“One thing this president has done very well is listen. We’ve had hundreds of business leaders here from all different types of areas — manufacturers, retail, airlines, community banks, big banks. We are listening and we have been taking feedback.”
Contact Debra J. Saunders at email@example.com or at 202-662-7391. Follow @DebraJSaunders on Twitter.
– Reducing the 7 tax brackets to 3 tax brackets of 10%, 25% and 35%
-Doubling the standard deduction
-Providing tax relief for families with child and dependent care expenses