Trump Administration Introduces Tax Plan, But Comes Up Short On Details

The Trump Administration is out with a tax plan, but it's seriously lacking in details.

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Yesterday, the Trump Administration rolled out its proposal for tax reform, but so far it’s little more than a summary of bullet points:

WASHINGTON — President Trump on Wednesday proposed sharp reductions in individual and business income tax rates and a radical reordering of the tax code that would significantly benefit the wealthy, but he offered no explanation of how the plan would be financed as he rushed to show progress before the 100-day mark of his presidency.

Mr. Trump’s skeletal outline of a tax package, unveiled at the White House in a single-page statement filled with bullet points, was less a plan than a wish list. Treasury Secretary Steven Mnuchin and Gary D. Cohn, the director of Mr. Trump’s National Economic Council, laid out the bare bones to reporters, part of a mad dash toward the administration’s 100th day on Saturday that has included the resurrection of a health care bill and near-daily signings of executive orders.

But they offered none of the standard accouterments of such rollouts, such as detailed charts showing the cost of each provision, phase-in periods, the impacts of the proposals on people and testimonials on the program’s potential benefits.

“We have a once-in-a-generation opportunity to do something really big,” Mr. Cohn said. “President Trump has made tax reform a priority, and we have a Republican Congress that wants to get it done.”

The proposal envisions slashing the tax rate paid by businesses large and small to 15 percent. The number of individual income tax brackets would shrink from seven to three — 10, 25 and 35 percent — easing the tax burden on most Americans, including the president, although aides did not offer the income ranges for each bracket.

Individual tax rates currently have a ceiling of 39.6 percent and a floor of 10 percent. Most Americans pay taxes somewhere between the two.

The president would eliminate the estate tax and alternative minimum tax, a parallel system that primarily hits wealthier people by effectively limiting the deductions and other benefits available to them — both moves that would richly benefit Mr. Trump. Little is known of Mr. Trump’s tax burden, but one of the small nuggets revealed in the partial release of a 2005 tax return this year was that he paid $31 million under the alternative minimum tax that year.

Corporations would not have to pay taxes on their foreign profits, an unusual proposal for a president who has championed an “America first” approach and railed against companies that move jobs and resources overseas. They would also enjoy a special, one-time opportunity to bring home cash that they are parking overseas, though administration officials would not say how low that rate would be or how they would ensure that the money would be invested productively.

Mr. Trump wants to double the standard deduction for individuals, essentially eliminating taxes on around $24,000 of a couple’s earnings. That proposal was met with alarm by home builders and real estate agents, who fear it would disincentivize the purchase of homes. The proposal would scrap most itemized deductions, such as those for state and local tax payments, a valuable break for taxpayers in Democratic states like California and New York.

But the president would leave in place popular breaks for mortgage interest, charitable contributions and retirement savings.

In a brief session with reporters, Mr. Cohn and Mr. Mnuchin said they had been toiling for weeks on the proposal, much of which closely resembles the plan Mr. Trump championed as a presidential candidate. They argued that it would spur robust economic growth that would — along with the elimination of deductions — cover the potentially multitrillion-dollar proposal entirely, a prospect that even many Republicans privately concede is virtually impossible.

“This will pay for itself with growth and with reduction of different deductions and closing loopholes,” Mr. Mnuchin said, repeating his optimistic estimate that the plan would spur the economy to grow at a rate of 3 percent annually. “The economic plan under Trump will grow the economy and will create massive amounts of revenues, trillions of dollars in additional revenues.”

Democrats rejected what they described as magical thinking behind the plan and condemned it as a giveaway to the rich masquerading as a tax overhaul.

“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,” Senator Ron Wyden of Oregon, the ranking Democrat on the Finance Committee, said in a statement. “Instead of providing a real tax reform plan as promised, this administration is offering cakes to the fortunate few.”

Bernard Baumohl, the chief global economist at the Economic Outlook Group, a forecasting firm, was unsparing.

“The effort to introduce more fiscal stimulus into the economy is genuinely underway,” he wrote to clients. “But the bare bones plan we saw unveiled today is already conceptually flawed and unlikely to go far in Congress. The final product will bear no resemblance to the principal points highlighted in today’s meager release. Certainly, the first step in this process was unimpressive.”

Mr. Cohn said the plan was “the most significant tax reform legislation since 1986” — the last time a comprehensive tax overhaul was enacted — as well as “one of the biggest tax cuts in American history,” in line with Mr. Trump’s grandiose portrayal.

(…)

Republican leaders who are eager for large tax cuts did not allow their internal divisions over elements of the package to obscure their overall support for Mr. Trump’s effort.

Mr. Ryan and Mr. Brady issued a joint statement with Senator Mitch McConnell of Kentucky, the majority leader, and Senator Orrin G. Hatch of Utah, the chairman of the Finance Committee, saying the principles outlined Wednesday would “serve as critical guideposts” as Congress and the administration worked together on a tax overhaul.

Mr. Trump also signaled support for revisions to the tax code that would help families with child-care costs, although his document provided no details. He called for ending the 3.8 percent tax on investment income that was imposed by the Affordable Care Act, restoring the capital gains rate to 20 percent.

Democrats are ready to battle Mr. Trump over the tax cuts, which they are determined to tie to his refusal to release his tax returns.

“Trump’s latest proposal is another gift to corporations and billionaires like himself,” said Thomas E. Perez, the Democratic Party chairman. “Trump must release his tax returns, as millions of Americans are demanding, before Congress can consider any Trump tax plan. We must know how much Trump would personally financially benefit from his own proposal.”

(…)

The plan contrasts starkly with the one championed by House Republicans, who proposed paying for their tax cuts in part with the new tax on imports, an effort to ensure that the measure would not swell the deficit.

The White House plan does call for “a territorial system to level the playing field for American companies,” akin to a component of House Republicans’ plan that would allow United States corporations to pay taxes only on their domestic profits.

“I worry that the Trump proposal would shift a tremendous amount of income abroad,” said Alan B. Krueger, who was a chairman of President Barack Obama’s Council of Economic Advisers. “It’s hard to square that with incentivizing investment in the U.S.”

One major change from what Republicans on Capitol Hill have called for is that the Trump Administration’s proposal allows for the possibility that the tax cuts would expire after ten years, much like the original Bush tax cuts did when they were passed early in the Administration of President George W. Bush. Then, as now, the purpose of such a limitation would be to enable the tax package to pass through the Senate in a form that would not permit it to be filibustered by the Democratic minority. Under Senate rules, that’s only possible if the tax cuts expire after a decade. Republicans in Congress, however, have long pushed for more permanent cuts, arguing that placing a time limit on a major overhaul of the tax code only serves to increase uncertainty and make it harder for businesses to engage in the type of long-term planning that makes investment and growth possible. There’s much truth in this argument, of course, but political reality makes it clear that a bill that didn’t have a time limit likely wouldn’t make it through the Senate at all. As a result, there have been at least some signals from House Republicans in particular that they’d be willing to accept the ten-year limit for now. Of course, as we all know, the Bush tax cuts were eventually mostly extended and eventually made permanent by President Obama during his first term in office. It’s possible that whoever would be President when the Trump tax cuts would expire would be pressured to do the same thing.

In reality, though, it’s hard to comment more than generally about this tax plan because there really isn’t much of a plan. As noted above, yesterday’s press appearance by the Treasury Secretary was long on promises and short on details, and the only thing the Administration has released on paper so far can literally fit on one sheet of paper:

Given the lack of details, it’s hard to gauge what the real impact of this proposal will be, but it is possible to make a few preliminary points. On the surface, reducing corporate tax rates to the point where they are more competitive with the rest of the world is a good idea that even many liberal economists have advocated. For one thing, such a move would likely mean that many major American corporations would repatriate profits from their foreign operations which are currently invested overseas in an effort to take advantage of lower tax rates. At least in the short term, this would result in increased revenue to the Treasury although it’s likely that this revenue would come in at a slow pace since corporations would likely space out the extent to which they do repatriate money so that they don’t face a large up-front tax bill. Additionally, the idea of lower, flatter tax rates in exchange for ending most deductions is one that has a lot of appeal in no small part because it would lead to a simpler tax code and potentially increased revenue overall. Politically, though, this would be difficult given the fact that many deductions are both politically popular and supported by strong business interests who employ armies of lobbyists precisely for the purpose of influencing legislation such as this. For example, the Trump Administration proposal would keep the mortgage interest deduction, which is probably among the most politically popular tax deductions, but eliminate the deduction for state and local property taxes, a move that would impact millions of taxpayers and which is likely to be opposed by Senators and Congressman from states with high property taxes. Finally, some of the plan’s proposals would, as noted, make it easier for businesses to restructure to take advantage of lower tax rates, a move that would likely lead to lower revenues while not necessarily contributing to economic growth.

Despite the lack of details, the Trump Administration and its allies were out in force after yesterday’s announcement to argue the benefits of the tax plan. Among the most often cited is the claims is the idea that the lower rates would lead to increased economic growth, with some advocates going so far as to forecast 4% growth in Gross Domestic Product, a figure we haven’t seen on a sustained basis for about twenty years now and even then only for a quarter or two. Economists from outside the Administration who have commented on the proposal so far, though, have cast serious doubt on this forecast, and this includes several conservative economists who have long advocated comprehensive tax reform. The problem for the Trump Administration, though, is that absent the assumption of that increase in GDP growth, the promises that the tax plan would not contribute to or raise the Federal budget deficit likely would not come true since the cuts would mean decreased revenue to the Treasury. Add into that the increases in spending that Trump is proposing, which include increases in defense spending and an as-yet-unrevealed infrastructure plan that would total something close a trillion dollars over its lifetime, and it’s easy to see how this could all result in significant increases in the deficit and the national debt, something that is likely to be a problem for Republican deficit hawks.

In any case, until we get a real bill and further details, including scoring by the Congressional Budget Office, it’s impossible to make any real judgment about this tax plan. On the surface, though, it doesn’t look very promising, and it looks less than likely that it would actually pass Congress.

FILED UNDER: Economics and Business, Taxes, US Politics, , , , , , , , , , , , , , , , , , , , , , , , ,
Doug Mataconis
About Doug Mataconis
Doug Mataconis held a B.A. in Political Science from Rutgers University and J.D. from George Mason University School of Law. He joined the staff of OTB in May 2010 and contributed a staggering 16,483 posts before his retirement in January 2020. He passed far too young in July 2021.

Comments

  1. KM says:

    Scant details indeed but what’s there is rather revealing.

    – Gifts to the rich were specified (no more AMT or estate, rewarding tax shelters abroad with a one-time come-home pass) but middle class voter get the vague assurance of “protection” for their mortgage deductions. Priorities are clear.

    – Businesses pay only 15% but the middle class will get stuck with 25% because there’s no way in hell the 10% bracket will cover a good portion of the country. In other words, you will pay more then your CEO does even though you’re the one who’s working harder. Screw the rural blue collar worker, Daddy needs a new Lexus. How do you plan on selling that in the Rust Belt, GOP?

    – Double the standard deduction but cut itemization. By the time you get home owner levels of wealth, have a family or have medical bills, the standard deduct doesn’t cut it. That right there will screw many to the tune of thousands.

    This might as well be labeled the FU Middle America Tax Plan – details will only make it worse.

  2. Moosebreath says:

    @KM:

    “– Double the standard deduction but cut itemization. By the time you get home owner levels of wealth, have a family or have medical bills, the standard deduct doesn’t cut it. That right there will screw many to the tune of thousands.”

    Yep. I looked at my return filed for 2016. By removing the deduction for state and local taxes, my itemized deductions would no longer be greater than the standard deduction. There’s likely to be plenty of people in the 75th to 95th percentiles in that boat.

    Doug,

    “Add into that the increases in spending that Trump is proposing, which include increases in defense spending and an as-yet-unrevealed infrastructure plan that would total something close a trillion dollars over its lifetime, and it’s easy to see how this could all result in significant increases in the deficit and the national debt, something that is likely to be a problem for Republican deficit hawks.”

    You believe there are any Republican deficit hawks when a Republican is in the White House? Really?

  3. teve tory says:

    “This will pay for itself with growth and with reduction of different deductions and closing loopholes,” Mr. Mnuchin said, repeating his optimistic estimate that the plan would spur the economy to grow at a rate of 3 percent annually. “The economic plan under Trump will grow the economy and will create massive amounts of revenues, trillions of dollars in additional revenues.”

    Supply-Side Economics. Keep on truckin’, Party of Stupid.

    “Republican deficit hawks”

    if you ever find any of these unicorns, let me know. All I see is a buncha greedy assholes who fret about the deficit when the subject is giving hungry kids some food, and don’t really give a shit when it’s for F-22s, or making a trust-fund kid marginally wealthier.

  4. grumpy realist says:

    I’m starting to think to run on a platform which insists economists which get their hair-brained ideas incorporated into policy by any government had better put their own lives behind their words. If the government tries out Economist X’s ideas for four years and they don’t work out as predicted then Economist X gets led to the guillotine and has his head chopped off (“so that his head be separated from his shoulders and that his spirit depart forthwith.”

    Maybe in this manner we can get rid of the Laffer Curve and the trickle-down idiots.

  5. grumpy realist says:

    P.S. I wonder if Mnuchin would be so willing to be the front man for Trump’s tax wishlist and as blithe about predicting the wonders this tax “plan” will do to the U.S. economy if he knew La Veuve Rouge awaited him at the end if he doesn’t deliver….

  6. JohnMcC says:

    @grumpy realist: “For the encouragement of the others”, eh?

    The problem is that Mr Laffer can only be executed once. Of course, that would leave Mr Greenspan whose head would nicely decorate a pitchfork.

  7. Daryl's other brother Darryl says:

    This administration is incompetent.

  8. SenyorDave says:

    @JohnMcC: The problem is that Mr Laffer can only be executed once. Of course, that would leave Mr Greenspan whose head would nicely decorate a pitchfork.

    I think they’ll have to wait in line behind the traitors in Trump’s inner circle. Do they still hang people for treason?

  9. Scott says:

    Couple of random thoughts:

    Tinkle down economics has been shown to be nonsense.

    The economy responds to demand. No jobs will be created unless there is a demand. Repatriation of funds will not necessarily be invested. They will be distributed as special dividends or sucked up by the M&A crowd in a mad rush of acquisitions. More islands in the Caribbean will more likely be bought.

    What is magical about fewer tax brackets? Has no impact on tax filing times. Why not a continuous curve instead. In fact, a case can be made that fewer brackets can drive abhorrent behavior to avoid going into a higher bracket.

    Estate tax affect so few people but generate a lot of money. And very few, if any, are mythical family farms.

    Why should labor be taxed higher than capital?

    I’m all for eliminating deductions (especially since my mortgage is almost paid off) but I bet I will end up paying more.

    Charitable deductions should be for genuine charities that directly help people, not funding the staffs of churches and millionaire pastors (I’m thinking the disgusting Hagee here in San Antonio).

    I will wait until a real bill occurs to see what happens but my position I’ve expressed to my congressman is no tax cuts until the budget is balanced.

  10. HarvardLaw92 says:

    I’ve seen this disaster movie – and its shitty sequels – already. It never ends well.

    Airport ’77? Screw that. We now get to watch Kansas ’17!

    🙄

  11. Hal_10000 says:

    So, like everything Trump, it’s something cobbled together at the last minute that has no bearing on anything.

    There’s some good commentary from Warren Meyere on how Trump’s proposals make no sense, even for business owners. I kind of like his proposal for reform: 1) eliminate the corporate income tax; 2) make up the revenue by taxing earnings, capitals gains, etc. at the same rate as normal income. Trump’s right that the corporate income tax system is an overly-complex disaster that is hurting the economy. But the solution is not to blow the deficit up.

  12. Stormy Dragon says:

    @KM:

    Businesses pay only 15% but the middle class will get stuck with 25% because there’s no way in hell the 10% bracket will cover a good portion of the country. In other words, you will pay more then your CEO does even though you’re the one who’s working harder.

    The existence of corporate taxes doesn’t absolve the CEO of paying his personal income tax on whatever his share of the remainder is…

  13. Daryl's other brother Darryl says:

    @Daryl’s other brother Darryl:
    This is the gang that couldn’t shoot straight.
    Everyday they get more fvcked up…and it’s all of their own doing.
    What happens when an outside actor get’s involved?
    Think Katrina, 9-11, N. Korea.
    The level of incompetence is at once staggering and dangerous.

  14. Scott says:

    @Stormy Dragon: I’m sure there are many others who understand these things better than I but if the CEO is paid for his services through an LLC then he will be taxed at 15%. I think I read that these pass-through legal entities will explode in numbers under the proposed tax “reforms”

  15. Gustopher says:

    It’s not just that the tax plan fits on a single page, but look at those margins and that spacing — it’s a tax plan that has been stretched to fit onto a single page.

    It’s an impressively modest effort, and you can be sure that no one in the administration has said “who knew that the tax code of largest economy of the world could be so complicated?”

    If people have really been working on this for months, I am duly impressed. Can I get that job? I would do better with the fonts.

    Courier italic? Come on… you’re completely hiding “The Biggest Individual and Business Tax Cut In American History”. Courier Bold Italic, in a slightly smaller size would have stood out a lot more.

    Also, what’s with the section headings? You want more space above the heading, and less below. These are floating weirdly in the middle and the eye wants to attach them to what came before.

  16. Facebones says:

    Wow, it is surprising that an administration like this one – normally so prepared and diligent – would try and cram a $4 trillion dollar tax plan into a few bullet points. They can’t even be bothered with pretending.

  17. Modulo Myself says:

    The effective corporate tax rate is something like 15% and plenty of large profitable corporations pay no tax, so the lowering the actual to 15% will just reduce the effective to like 5% and increase the number who pay no taxes. But I’m sure this will help the economy.

  18. michael reynolds says:

    Corporate profits are at record highs, but somehow they’re paying too much tax. Right.

    The countries with lower tax rates are not out-performing us, but somehow this will cause a huge increase in business, because we’re special. Right.

    And it will all pay for itself, just like it has: never.

    But hey, this Democrat with a corporation is going to do fine under this plan. How about our local Trump-defenders?

  19. Daryl's other brother Darryl says:

    @Scott:
    @Stormy Dragon:

    these pass-through legal entities will explode in numbers under the proposed tax “reforms”

    Exactly.

  20. Bob @ Youngstown says:

    My random thoughts:

    Trump administration has been “working hard” for weeks to put together this ‘wet dream for the wealthy’? Really ??? There is really no substance to this, it doesn’t tell the American public anything more than what we all knew about Trump’s dreams six months ago.

    I’d really like to understand the rationale to eliminate deductions for : State Income Taxes, Local Income Taxes, Local real estate taxes, State state sales taxes.

    I’d really like to understand the rationale to eliminate deductions for medical expenses that exceed 10% AGI. I know for a certainty that, even with doubling the standard deduction, the elimination of medical expenses will cost me more money in Federal tax.

    To prove that point, I recalculated my 2016 taxes excluding medical expenses and doubling the standard deduction. My tax liability increased by 12%.

  21. michael reynolds says:

    @Daryl’s other brother Darryl:

    So, I am not a financial wizard. <– comic understatement. But 100% of my income runs through my corp. I get a check, I dump it in my corp account and have my bookkeeper pay me. Does this plan actually mean that I can pay the 15% corporate rate on all of that?

  22. ...Ig'nint... says:

    @Scott:

    In fact, a case can be made that fewer brackets can drive abhorrent behavior to avoid going into a higher bracket.

    I could be wrong, but I think you’re looking at a feature and calling it a glitch.

  23. teve tory says:

    to avoid going into a higher bracket.

    why would one avoid ‘going into a higher bracket’? You still come out with more money.

  24. ...Ig'nint... says:

    @michael reynolds: I;m not a financial wizard either, but if your accountant formed a corporation to pay you and you’re not paying less in taxes than you would otherwise, you need to have a forensic accountant searching for a Grand Cayman bank account in your accountant’s name.

  25. Scott says:

    @…Ig’nint…: BTW, I meant aberrant not abhorrent. But we were discussing Trump….

  26. EddieInCA says:

    Every penny I make, goes through my Corporation. I will save a crap-ton on Taxes with this new plan. So I should be happy, right? No. It’s sucks as plan. It’s a giveaway to people like me. So you’re going to stop deductions? On what? Business Expenses? I don’t think so. By the time, I, legally, write off my legitimate business expenses (which, in my field, includes things like Movie Tickets, Broadway Show Tickets, my cable bill, my internet bill, my celll phone bill, travel to film festivals, food, cocktails with prospective employers, golf with stuidio executives, and many others) I end up with a lower tax rate than most working individuals.

    That’s what has to change.

    The change to the AMT alone will mean an extra $40-$60K per year into my pocket. It’s ridiculous.

    Is our Tax system too complicated? Yep. But the problem isn’t that we pay too little tax. It’s that people like me, and those who make much more than me, don’t pay enough.

  27. Argon says:

    Republicans in Congress, however, have long pushed for more permanent cuts, arguing that placing a time limit on a major overhaul of the tax code only serves to increase uncertainty and make it harder for businesses to engage in the type of long-term planning that makes investment and growth possible.

    Then create a bill that sufficient members in both parties can support. Conservatives are already over-represented in the Senate thanks to Montana getting the same number of votes as California.

  28. MarkedMan says:

    FWIW, Bill Gates’ salary when he was Microsoft CEO was around $100K/yr. So you might ask how he realized billions from his tenure there? My understanding is that there are a number of mechanisms but one of the largest was that he and the other senior execs were largely paid via special options. They appreciated substantially and then they were taxed at the much lower capital gains rate. Which were dramatically lowered under Reagan. So while middle class to upper middle class chumps were paying 20-40% people like Bill Gates were taxed at 18%. That’s the Republican Party in a nutshell: give big gifts to the powerful who have accountants to check the math and understand what they are getting, and blather on about abortion and patriotism and school prayer to the suckers.

  29. Gustopher says:

    @Bob @ Youngstown:

    I’d really like to understand the rationale to eliminate deductions for : State Income Taxes, Local Income Taxes, Local real estate taxes, State state sales taxes.

    It shifts the tax burden onto states with higher taxes and higher wages. It’s well known that the blue states pay more in federal taxes than they get back, and this will skew it a bit more.

    If you’re living in Alabama, your total income will be less than someone in California, and you are probably being taxed at a lower rate. Double the personal exemption (which is not adjusted for local cost of living, so represents a larger percentage of the income of someone in Alabama), and eliminate the state tax deductions (which effectively are adjusted for cost of living, and will be higher in California than Alabama), and you’re screwing over California to pay for Alabama.

    Since I am in Washington, where we don’t have a state income tax, I’m not sure if I will come out ahead or not. My local real estate taxes are high, but our state funds itself mostly on sales taxes and fees, which are a lot harder to itemize.

  30. Gustopher says:

    @Bob @ Youngstown:

    I’d really like to understand the rationale to eliminate deductions for medical expenses that exceed 10% AGI. I know for a certainty that, even with doubling the standard deduction, the elimination of medical expenses will cost me more money in Federal tax.

    That helps keep Trumpcare afloat. If you cannot afford your expensive, indulgent, medical habits, you will stop using so much medical care, and total costs will go down.

    I mean, you might stop using them since you’ll be dead, but that just helps out the social security trust fund.

  31. Gustopher says:

    What I really like about this tax plan, and the administration as a whole, is that it’s really helping me be a less cynical person — a bit of personal growth that I have been striving for.

    Now, when I assume the worst, I can check the news, and discover that I actually wasn’t assuming the worst, and that there was something even worse that I wasn’t even considering, and that this even worse thing is what is being proposed. I’ve gone from a cynic to an optimist, overnight.

    Thanks, Donald!

  32. Daryl's other brother Darryl says:

    @MarkedMan:

    give big gifts to the powerful who have accountants to check the math and understand what they are getting, and blather on about abortion and patriotism and school prayer to the suckers.

    Exactly…
    https://tribuneofthepeople.files.wordpress.com/2012/06/wfnue.jpg

  33. Daryl's other brother Darryl says:

    @michael reynolds:

    So, I am not a financial wizard

    I’m not either…but that’s how I understand it.
    Clearly there are others here better qualified to fill in the details.

  34. wr says:

    @michael reynolds: ” Does this plan actually mean that I can pay the 15% corporate rate on all of that?”

    If that’s the case, it would mean I never have to zero out my corporation at the end of the year — and instead of paying myself a salary, which triggers not only high federal and state taxes, but the dreaded “self-employment tax” of both side of SS and Medicare (so 14% instead of 7%), I could just keep corporate profits and pay a flat 15%? Cool for me — too bad about the fate of the country.

  35. Hal_10000 says:

    @michael reynolds:

    It’s not clear. The Meyer post I linked above goes through some of this. I *think* what will happen is that if you pass through profits from your corporation, it gets taxed at 15% whereas a salary would be taxed at normal income rates. This is basically inviting everyone to make pass-through corporations. But … I think you and I, i these two posts, have already invested more thought into this than Trump has. So who knows?

  36. SenyorDave says:

    I assume that if anything like this goes through it will pass with no Democratic votes. If the Democrats don’t oppose this strongly with a huge ad campaign pointing out things like Trump directly benefiting from the elimination of the AMT it will be political malpractice. If they do oppose it and it goes through anyway and the GOP doesn’t get destroyed in the midterms, it will answer the question as to why the Democrats are out of step. They are out of step because a lot of people really will believe lies, even when those lies have been shown to be lies. Need a practical example of how this would play out, look at Kansas.

    BTW, Mnuchin won’t even answer the question as to whether middle class folks will be paying more in taxes. But the answer for the 1% is pretty easy.

  37. gVOR08 says:

    @Bob @ Youngstown:

    I’d really like to understand the rationale to eliminate deductions for : State Income Taxes, Local Income Taxes, Local real estate taxes, State state sales taxes.

    It will disproportionately hit blue states. That’s a sufficient reason for GOPs.

  38. al-Alameda says:

    @michael reynolds:

    The countries with lower tax rates are not out-performing us, but somehow this will cause a huge increase in business, because we’re special. Right.

    And it will all pay for itself, just like it has: never.

    Hypothetically, marginal income and corporate tax rates of Zero Percent would solve every fiscal, business and unemployment problem we have, right?

    By the way, I write this as I await word that the Money Helicopter has dropped a pallet containing $100,000,000 into my backyard – I believe in the Money Helicopter, don’t you?

  39. Guarneri says:

    @michael reynolds:

    I don’t know your specifics, but

    If you are an S corp you are a passthrough entity and income to you is taxed like any individual. You probably also,pay a self employment tax.

    If you are a C corp your corporation would pay the 15% rate on its profits. (You probably would be an expense in calculating that profit). But if in addition it distributed capital to you above your basis that would be a dividend at capital gains rates, so you would pay an additional 23% with the ObamaCare tax.

    If you did not distribute dividend/capital it would pile up as cash or plowed back into some other balance sheet asset. You would pay the distribution tax later. It’s just timing.

  40. ...Ig'nint... says:

    @Gustopher: And he sticks the landing for a 10! Excellent!

  41. HarvardLaw92 says:

    @Stormy Dragon:

    If this passes, for pass throughs anyway, he’ll be paying 15%

  42. HarvardLaw92 says:

    @michael reynolds:

    Depends. Did you form a C corp that elects to pay you wages, or is it a pass through entity for which you receive a K1 that allocates to your personal return?

  43. Tyrell says:

    The president needs to form a committee of tax experts and economists (no politicians) ; also some normal everyday working people . Give them a few days and they will come up with a sensible, simple plan that makes everyone happy. I would like to see lower taxes and a simpler process: a tax form no bigger than a postcard and a 4th grader can fill it out.

  44. HarvardLaw92 says:

    @EddieInCA:

    To put it in perspective – if I hadn’t restructured my taxation to effect a zero rate when I moved, I (and every other partner in the firm) would be paying (going forward) an actual federal tax rate of 15% on what was (last year) a little over $3.4 million each in distributed profits.

    Instead of the roughly 38.5% actual rate that I paid.

    For guys like me, this is roughly a 61% effective cut in federal income taxes paid.

    Or to put it layman terms – right at an additional $800k per year left in my wallet.

    Which of course I would spend to create jobs in the Rust Belt & coal mining country 🙄

  45. Guarneri says:

    ” I (and every other partner in the firm) would be paying (going forward) an actual federal tax rate of 15% on what was (last year) a little over $3.4 million each in distributed profits.

    Instead of the roughly 38.5% actual rate that I paid.”

    Where in this tax plan does it say that K1 allocations will now be taxed at 15% instead of your personal rate?

  46. HarvardLaw92 says:

    @Guarneri:

    You evidently missed the part about passthroughs. He’s proposing to extend the same corporate rate to pass through entities as well.

  47. grumpy realist says:

    @Tyrell: And I want a fairy godmother to show up and provide me with a winning lottery ticket and a drink from the Fountain of Youth, but that’s not happening either.

  48. michael reynolds says:

    @HarvardLaw92:

    If it’s not already, it’ll be a pass-through about ten minutes after this proposal passes.

  49. HarvardLaw92 says:

    @michael reynolds:

    Bingo …

  50. Guarneri says:

    @HarvardLaw92:

    I haven’t spent any time looking at the plan. (I’m enjoying the beach in the Bahamas). But I’d have to see that to believe it. If you told me that when the K1 whacks up 1065 income the portion that is not ordinary business income gets 15% treatment I’d understand. But magically converting the old personal rates on ord bus inc to 15% seems a bridge too far. If that’s actually the case I’d oppose it.

  51. HarvardLaw92 says:

    @Guarneri:

    The plan proposes to tax compensation at 35% and business income at 15%. Find me a nimrod who’ll opt to pay 35% given the option not to.

  52. Gustopher says:

    If we are actually trying to create jobs with our tax policy (I know, we aren’t, but let’s just play along), then why not reward job creators for actually creating jobs?

    Lets cut the payroll tax for full time employees, and cut some corporate deductions to make it revenue neutral (not that Republicans care about being revenue neutral with a Republican president)

    Reward the actual job creators, not the hypothetical job creators.

  53. michael reynolds says:

    @Guarneri:

    Dude, the entire thing is half a page stretched to fill a page. You can read the whole thing in thirty seconds. And yet you’re lecturing people on what’s in it.

  54. Guarneri says:

    It took me all of 10 minutes to peruse a few articles to get the real dynamics. The plan is just trying to put relatively small enterprises on the same footing as larger corporate enterprises.

    Anyone want to bet that caps are put in place to restrict high income enterprises/partners from enjoying the 15% rate? I’ll take all the action on that anyone wants to make.

    Don’t spend your tax cut yet Michael.

  55. Guarneri says:

    It took me all of 10 minutes to peruse a few articles to get the real dynamics. The plan is just trying to put relatively small enterprises on the same footing as larger corporate enterprises.

    Anyone want to bet that caps are put in place to restrict high income enterprises/partners from enjoying the 15% rate? I’ll take all the action on that anyone wants to make.

    Don’t spend your tax cut yet Michael.

  56. Guarneri says:

    @michael reynolds:

    Show me where I was lecturing. I started by dealing with your hypothetical. And per my comment, you guys are so busy throwing brickbats you haven’t even stopped to consider how this is really going to play out. Try to elevate your thinking above ultra-simplistic.

  57. Slugger says:

    I believe that the word “Trump” and the word “plan” are kind of like matter and antimatter. When they get too close, they destroy each other, but unlike in the physical world no energy is created.
    Taxes for many wage earners who get a W-2 can already fit on a postcard. The complexities in the tax code are that there are special treatments for every interest group that can influence a politician or two.

  58. HarvardLaw92 says:

    @Guarneri:

    I don’t think it has any chance of becoming law regardless. It’s just another example of how truly inept these people are with respect to fiscal policy. I’m addressing it in that context.

  59. michael reynolds says:

    @Guarneri:
    Really? You think I forgot about the Senate? And the people? And the media? And the sheer power of inertia combined with frantic lobbyists?

    Obviously this plan ain’t happening, we’re talking about the proposal qua proposal. Even Republicans can’t look the voting public in the eye and say “I ran the deficit up by two trillion but I’m gonna compensate by taking your health insurance.”

    We’re just havin’ us some fun with the dumb fwck you elected. How’s that wall comin’, Donny? Have you taken care of China’s currency manipu. . . say what, Donny? They’re not? But the Export Import Bank, you’ll get rid of. . . no? How about repealing Obamacare? Not so much? Eliminate ISIS. . . take down the North Korean nukes. . . um. . . what have you have been doing, Don? Oh, that’s right: golfing.

    You know, Drew, back in the old days when I was hiring and firing restaurant people I knew within two hours on the job whether they would work out. Any smart manager figures it our pretty quickly. How’s your employee Combover Don, doing?

  60. EddieInCA says:

    You want to fix the tax code?

    Tax all income – regardless of how it was created – as income. On the money I make on my trades and portfolio, get taxed at the cap gains tax rate. There have been a few years in the past where my cap gains income was more than my actual payroll income. On those years, once I finished with deductions, I paid zero. Had I been taxed as regular income, I’d have had to pay tax.

    Right now, I can go to NYC, visit WR, hit a play or two on Broadway, go to a few meetings at AMC or ABC Networks, eat at a whole lot of good restaurants, and write the whole thing off. All of it. And you all subsidize it.

    If it fair? Hell no? Is it right, morally? No. But is it legal? Yep.

    This tax plan will do to the country what it has done for Kansas and Louisiana.

    I wonder how they’ll blame Obama for the upcoming disaster.

  61. michael reynolds says:

    @EddieInCA:

    Right now, I can go to NYC, visit WR, hit a play or two on Broadway, go to a few meetings at AMC or ABC Networks, eat at a whole lot of good restaurants, and write the whole thing off. All of it. And you all subsidize it.

    Hey, shut-up! You’re giving away the scam.

    I’m actually at work on an adult book series, each book to be set in a prominent expat area around the world. First stop was Cyprus. Which is certainly not a way for me to write off every vacation, ever. Thinking Costa del Sol, Panama, Cuba, Thailand. . . it’s purely coincidental that they’re all places with lots of sun, great food and excellent hotels.

  62. Gustopher says:

    @EddieInCA: haven’t the Republicans already blamed Obama forTrumpbeingthe nominee? Had Obama just been reasonable, the Republican base wouldn’t have nominated anoverweight shaved orangutan in a suit with a poorly tied tie.

  63. SC_Birdflyte says:

    Lawyers could see a bonanza if this goes through, as thousands of employees rush to organize themselves as S Corporations or LLC’s.

  64. wr says:

    @Tyrell: ” a tax form no bigger than a postcard and a 4th grader can fill it out.”

    Know one who can do it for you?

  65. HarvardLaw92 says:
  66. Pch101 says:

    Reagan = Trickle down

    Trump = S**t rolls downhill

  67. wr says:

    @michael reynolds: “You can read the whole thing in thirty seconds. And yet you’re lecturing people on what’s in it.”

    Yes, but he’s on a “beach” in the “Bahamas.” And in his ludicrous fantasy world there is no time for that kind of heavy reading.

  68. Just 'nutha ig'nint cracker says:

    @Gustopher: No, that won’t work. If we reward actual *job creation,* they’ll have to spend that money on wages. The plan needs to allow you to keep the money as a prepayment for creating *future wages* or it doesn’t work at all.

  69. Mikey says:

    @michael reynolds: All good, but I won’t believe you’re *really* dedicated to tax avoidance until you do some research in Yakutsk, in February.

  70. grumpy realist says:

    (I was going to say “totally OT” but put this in the category of “idiot clown getting bit in the ass”…)

    Anyone been keeping an eye on what Alex Jones has been doing? Well, aside from losing his child custody court case, he’s now looking down the throat of a BIIIIG lawsuit from a large company he’s pissed off.

    I hope the owner of Chobani bankrupts the little loudmouth. (And I’m definitely going to buy some more yogurt from them.)

  71. michael reynolds says:

    @Mikey:
    You’ve been playing Risk.

  72. slimslowslider says:

    @Guarneri:

    Enjoying the Fyre Fest?

  73. grumpy realist says:

    @HarvardLaw92: Heh. This is sort of like how those of us in patent law called the America Invents Act “the patent lawyers’ permanent employment act.”

  74. DrDaveT says:

    @michael reynolds:

    You’ve been playing Risk.

    Nah, if he had he’d know that Kamchatka is where you go when you need to block what’s happening in North America…