President Donald Trump’s eagerly awaited tax reform plan arrived Wednesday as a one-page sheet of mostly general principles, largely repackaging ideas from his presidential campaign with a promise to deliver the nation’s biggest tax cut ever.
The rollout was hastily arranged after Trump took Treasury Secretary Steven Mnuchin and other White House officials by surprise last week when he promised a “big announcement” on tax reform would be coming this Wednesday. But what Mnuchin and top economic adviser Gary Cohn presented at a White House briefing will do little, if anything, to move the ball forward on tax reform.
The announcement included a big tax cut for businesses, to 15 percent; a more modest cut and fewer tax brackets for individuals; doubling the standard deduction; and providing tax relief to help pay for child and dependent care expenses.
At the same time, the plan would get rid of some taxes that mostly hit the wealthy, and likely Trump himself, including the estate tax and the alternative minimum tax, while promising to “Eliminate targeted tax breaks that mainly benefit the wealthiest taxpayers.”
The plan would retain deductions for mortgage interest and charitable donations but get rid of all others, including for the state and local taxes Americans pay and for health insurance they get from employers — both controversial ideas.
“What this is about is creating jobs and creating economic growth,” Mnuchin said at the White House. “And that’s why massive tax cuts and massive tax reform and simplifying the system is what we’re going to do.”
Throughout the week, officials put out conflicting statements about what would be in the tax package, and one official told POLITICO that the plan hadn’t been written by late Tuesday afternoon. The unveiling seemed intended to give Trump another thing he could point to as the traditional 100-day mark for measuring presidential achievements looms and some of his top priorities — including repealing and replacing Obamacare — remain undone.
As reporters peppered Mnuchin and Cohn with questions about the finer points, Cohn said, “We’ll get back to you with definitive answers on all these details.”
The rollout is likely to underwhelm, or frustrate, House Republicans who have been working on their own tax reform for months and waiting for clarity on where Trump stands on crucial details. That includes a controversial “border adjustment” tax on imports that lawmakers are counting on to generate more than $1 trillion to offset the cost of tax cuts.
Cohn and Mnuchin said they’d be in constant dialogue with lawmakers to remake U.S. tax laws based on four principles: reduced rates, simplification, middle-class tax cuts and getting American businesses with foreign earnings to bring home that money.
House Speaker Paul Ryan, Ways and Means Chairman Kevin Brady, Senate Majority Leader Mitch McConnell and Senate Finance Chairman Orrin Hatch released a statement that said Trump’s outline “will serve as critical guideposts for Congress and the administration as we work together to overhaul the American tax system.”
Democrats were scornful.
“This is an unprincipled tax plan that will result in cuts for the one percent, conflicts for the President, crippling debt for America and crumbs for the working people,” said Sen. Ron Wyden, the top Democrat on the Finance Committee.
Mnuchin has tried to sell the plan as largely aimed at providing tax relief to the middle class. Doubling the standard deduction, for instance, would raise it to $12,600 for single filers and $25,200 for married couples filing jointly, based on the deduction for 2016.
Though mortgage and charitable deductions would remain in place, those higher thresholds for the standard deduction have caused worries in the real estate and charitable communities, which count on the two targeted deductions to boost home sales and incentivize giving. They fear a larger standard deduction would take some of the luster off the mortgage and charitable deductions.
For high-income individuals, the plan would get rid of the 3.8 percent tax on investment income that helps pay for Obamacare.
It proposes three individual tax brackets of 10 percent, 25 percent and 35 percent, the latter being slightly higher than 33 percent called for in the House Republican plan.
Trump’s plan has also broken with House Republicans on other areas, in large measure over how and whether to offset the cost of the tax cuts.
“This will pay for itself with growth and with … reduction of different deductions and closing loopholes,” Mnuchin said.
But the 15 percent tax rate for all businesses seems mathematically impossible without deeply slashing other tax benefits or cutting spending, both politically difficult.
Trump’s low proposed rate for non-corporate companies, down from Ryan’s 25 percent proposal, has also been criticized as potentially ripe for fraud and abuse.
On taxing U.S. companies’ income earned abroad, Trump is pushing to harmonize the U.S. with most of the world, where income is only taxed where it’s earned, not when it’s also brought into the U.S. That marks a shift from Trump’s campaign ideas on the issue.
Also on international income, the Trump plan would require a one-time tax on the estimated $2.6 trillion in earnings that corporations have kept abroad under the current system, but doesn’t include a rate. That kind of detail will require continued conversation with Congress, Mnuchin said, promising a competitive rate.
“We are moving as quickly as we can,” he said.
But what’s not mentioned — Ryan’s import tax idea known as border adjustments – is notable. Ryan signaled he wants to salvage the idea in some form.
“We all agree that in its present form it needs to be modified,” he said.
One thing sure to draw the attention of Democrats and other critics of the plan in coming days is how the plan would affect Trump and the numerous wealthy members of his administration.
Trump, his family and his wealthiest advisers are all in position to personally profit from the new tax plan — through the elimination of the alternative minimum and estate taxes, the lower tax rate for businesses that aren’t incorporated and the elimination of Obamacare taxes.
Deciphering their exact savings is a challenge considering limits on publicly available tax and other financial information. Trump has broken with decades of presidential tradition by refusing to release his tax returns.
“Clearly, getting rid of the AMT is a hands-down winner for all of them,” said Joann Weiner, a former Treasury Department economist and current George Washington University professor.
Trump officials sidestepped questions about the potential personal benefit from their tax plans.
“I can’t comment on the president’s tax situation since I don’t have access to that,” Mnuchin told reporters.
But at the same time, he said Americans have “plenty of information” on Trump’s taxes and should not expect to see the president’s tax returns made public.
Darren Samuelsohn contributed to this report.
Powered by WPeMatico