President Donald Trump is proposing “the biggest tax cut” ever even as the government struggles with mounting debt, in an effort to fulfill promises of bringing jobs and prosperity to the middle class.
White House officials on Wednesday were to release broad outlines of a tax overhaul that would provide massive tax cuts to businesses big and small. The top tax rate for individuals would drop by a few percentage points, from 39.6 percent to the “mid-30s,” according to an official with knowledge of the plan.
Small business owners would see their top tax rate go from 39.6 percent to 15 percent, said the official, who was not authorized to publicly discuss the proposal before the White House announcement and spoke on condition of anonymity.
Treasury Secretary Steve Mnuchin, in a Wednesday morning speech, said the proposed overhaul would amount to “the biggest tax cut” and the “largest tax reform” in U.S. history.
White House officials already have said the top corporate tax rate would be reduced from 35 percent to 15 percent. The plan will also include child-care benefits, a cause promoted by Trump’s daughter Ivanka.
Trump sent his team to Capitol Hill on Tuesday evening to discuss his plan with Republican leaders.
“They went into some suggestions that are mere suggestions and we’ll go from there,” said GOP Sen. Orrin Hatch of Utah, chairman of the Senate Finance Committee.
The White House’s presentation will be “pretty broad in the principles,” said Marc Short, Trump’s director of legislative affairs.
In the coming weeks, Trump will solicit more ideas on how to improve it, Short said. The specifics should start to come this summer.
Short said the administration did not want to set a firm timeline, after demanding a quick House vote on a health care bill and watching it fail.
But, Short added, “I don’t see this sliding into 2018.”
Republicans who slammed the growing national debt under President Barack Obama have said they are open to Trump’s tax plan, even though it could add trillions of dollars to the deficit over the next decade.
Echoing the White House, Republicans argue the cuts would spur economic growth, reducing or even eliminating any drop in tax revenue.
“I’m not convinced that cutting taxes is necessarily going to blow a hole in the deficit,” Hatch said.
“I actually believe it could stimulate the economy and get the economy moving,” Hatch added. “Now, whether 15 percent is the right figure or not, that’s a matter to be determined.”
The argument that tax cuts pay for themselves has been debunked by economists from across the political spectrum.
On Tuesday, the official scorekeeper for Congress dealt the argument – and Trump’s plan – another blow.
The nonpartisan Joint Committee on Taxation said a big cut in corporate taxes, even if temporary, would add to long-term budget deficits. This is a problem for Republicans because it means they would need Democratic support in the Senate to pass a tax overhaul that significantly cuts corporate taxes.
Republicans have been working under a budget maneuver that would allow them to pass a tax bill without Democratic support in the Senate, but only if it didn’t add to long-term deficits.
Senate Majority Leader Mitch McConnell, R-Ky., said the Senate was sticking to that strategy.
“Regretfully we don’t expect to have any Democratic involvement in” a tax overhaul, McConnell said. “So we’ll have to reach an agreement among ourselves.”
Democrats said they smell hypocrisy over the growing national debt, which stands at nearly $20 trillion. For decades, Republican lawmakers railed against saddling future generations with trillions in debt.
But with Republicans controlling Congress and the White House, there is no appetite at either end of Pennsylvania Avenue to tackle the long-term drivers of debt, Social Security and Medicare. Instead, Republicans are pushing for tax cuts and increased defense spending.
“I’m particularly struck by how some of this seems to be turning on its head Republican economic theory,” said Sen. Ron Wyden of Oregon, the top Democrat on the Senate Finance Committee.
Added Sen. Bob Casey, D-Pa.: “On a lot of fronts, both the administration and Republicans have been contradictory, to say the least.”
“There’s no question we should try to reduce (the corporate tax rate), but I don’t see how you pay for getting it down that low,” Casey said. “Fifteen percent, that’s a huge hole if you can’t make the math work.”
(AP)
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15 Responses
> The argument that tax cuts pay for themselves has been debunked by economists from across the political spectrum.
Absurd statement in a vacuum. So if there was a 100% tex rate on all revenue that means reducing the tax rate to 50% would hurt government revenue?
It’s about time.
This tax cut is a great idea, since large corporations have been really struggling to earn tens of billions of dollars in recent years; finally some relief.
Meanwhile, of course this won’t increase the national debt, or lead to a decrease in revenue for government. And of course this is a big win for ordinary Americans, since now businesses will be even bigger!! Win-win!! Make American businesses greater!!
What happened to all the Tea Party deficit hawks?
This tax cut will explode the national deficit while serving to enrich corporate America and people like Trump and Mnuchin who stand to gain the most from this.
The 20% corporate tax rate proposed by the house Republicans is much more fiscally responsible and sane.
On further thought, I think that while this is a good idea, really the corporate tax rate should be closer to 5%. Once corporations have a lower tax rate, they’ll be more eager to be more profitable. When taxes are so high, corporations don’t have as much motivation to succeed, and are more likely to fail.
#1) Statement was not made in a vacuum and neither is it absurd. The loss of government revenue caused by a drastic slashing of corporate taxes will not be magically made up by greater economic activity. The point is that this tax cut will add to the national deficit. Claiming otherwise is wrong and dishonest.
The Congress has the sole power under the Constitution to set tax rates. The President has minimal say in the matter. Once Trump learns that he has to defer to Congress he’ll make progress in getting things done. (Trump never was part of the “corporate” world, and this is the first time he has to deal with a “board” – he’s not used to being other than the absolute boss).
Most Democrats will oppose anything Trump favors, and many if not most Republicans are fiscal conservatives who don’t support running an incrasingly massive deficit. Unless Trump builds a bi-partisan coalition, this won’t come about.
Part of the proposal, according to a radio report, is for the “corporate rate” on pass-through entities (S-corps, partnerships and LLC’s) to be reduced to 15%. But the current “tax rate” on pass-through entities is zero. This makes no sense, or it means that equity holders of highly profitable pass-through entities will be taxed at the rate of 15% instead of the top personal tax rate of 39% (or whatever it is reduced to, but more than 15%). That leaves decently paid wage earners (e.g., military brass, teachers) paying enormous taxes compared to their employers. One example of such an employer is … the Trump Organization. So Mr. T could pay a lower tax rate than the women changing the sheets in his hotels. Will that make America great?
One other thing: We have been hearing for more than 30 years that “tax cuts pay for themselves.” The evidence is no where to be found, but some people still believe (or pretend to believe it. The only way tax cuts pay for themselves is if the Tooth Fairy’s baby sister, the Tax Cut Fairy, leaves money under your pillow.
huju: The reson Trump organization (a corporation, albeit not a public one) would pay a lower rate is that the money is being taxes to Trump the person (whose tax rate will normally be quite high, assuming he made a profit, which in his line of work doesn’t always happen). The reason the person changing the sheets is getting ripped off is the payroll tax which don’t reflect exemptions, and only impact the middle class since. Most middle classes, and almost all less than middle class people, primarily pay the payroll tax rather than the income tax.
What impact will the tax cut have on Donald Trunp, his family, his company and the deficit?
akuperma
i have read your post 4 times and i still can’t make a laining on it
and i should add, i am an accountant
Huju,
I thought the tax cut fairy was related to the minimum wage fairy that people believe will make them rich
To coffee addict: No one (except you) believes the minimum wage fairy makes anyone rich. That’s why he is called the MINIMUM wage fairy.