President Trump to unveil proposal for massive tax cut

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Republican U.S. Presidential nominee Donald Trump attends a campaign event at the Greater Columbus Convention Center in Columbus, Ohio August 1, 2016. REUTERS/Eric Thayer

WASHINGTON – The White House plans Wednesday to unveil President Donald Trump’s proposal to revamp the federal tax system, a bid to jump-start one his top domestic policy agenda items and score a major legislative success for an administration that has thus far struggled on Capitol Hill.

Trump’s plan involves broad tax breaks for both individuals and companies. The proposal would significantly increase the standard deduction that individuals and married couples can claim on their tax returns. The plan is expected to call for cutting the corporate tax rate from 35 percent to 15 percent.

Trump’s plan would also allow millions of small businesses to take advantage of this lower rate, though it would add certain protections aimed at preventing high-earners from gaming the system to lower their personal taxes, Treasury Secretary Steven Mnuchin said Wednesday morning.

“This is going to be the biggest tax cut and the largest tax reform in the history of our country, and we are committed to seeing this through,” Mnuchin said at an event hosted by The Hill.

Mnuchin and National Economic Council Director Gary Cohn are expected to brief the media on details of the plan Wednesday afternoon.

The White House is not planning to propose specific legislation or even roll out a complete plan, instead offering a broader framework. And several portions remain in flux: White House officials are also working to develop an expanded Child and Dependent Care Credit, which they say they hope would benefit low- and middle-income families facing substantial burdens in paying for child care.

Trump’s plan is projected to boost government debt, as his proposed tax cuts would lead to steep declines in federal revenue. The primary congressional panel tasked with scrutinizing tax proposals reported this week that cutting the corporate tax rate to 20 percent – five percentage points higher than Trump is proposing – would decrease revenue by nearly $490 billion over 10 years.

Mnuchin said Wednesday that the White House would make other changes to the tax code, specifically by eliminating or limiting some deductions. He did not specify which ones, however, and Congress has historically had little success agreeing on where to use the tax code to raise more money.

Instead, the White House is promising the tax cuts will keep revenue level over the long term because, though they’re cutting rates, they’ll stimulate an economic boom. “The plan will pay for itself with growth,” Mnuchin said last week.

Economists are broadly skeptical that any tax plan can produce the rates of economic growth Trump has promised – or that would be needed to prevent the tax plan from ballooning the deficit.

The White House’s proposal bypassed a plan from House Republicans, led by Speaker Paul D. Ryan, R-Wis., that would have offset broad reduction in rates with a change in the way imports and exports are taxed, a proposal known as a “border adjustment tax.”

Mnuchin said Wednesday that Trump’s White House won’t support this specific House GOP proposal, but Mnuchin said they would work with Republicans to revise the idea in a way that it could eventually become part of the overhaul.

“We don’t think it works in its current form,” but the White House will work on “revisions that they would consider,” Mnuchin said.

The legislation, however, faces an uncertain path forward.

Some Democrats were immediately skeptical. Senate Minority Leader Charles E. Schumer, D-N.Y., said members of his party would scrutinize the details, but he predicted the package could amount to major tax breaks for the wealthiest Americans and for businesses like those formerly run by Trump.

“That’s not tax reform,” Schumer said on the Senate floor. “That’s just a tax giveaway to the very, very wealthy that will explode the deficit.”

Speaking Wednesday morning on Capitol Hill, Ryan called Trump’s framework “a critical step forward in this effort.”

“We’ve been briefed on what they are going to do and it is basically along exactly the same lines we want to go,” Ryan said. “So we see this as progress being made, showing that we are moving and getting on the same page. We see this as a good thing.”

Trump’s tax plan does have an advantage over Ryan’s and other plans, including those supported by some Democrats, that aim to make up the forgone revenue. While there is broad bipartisan support for plans that both cut rates but make up for it with the elimination of certain tax breaks or reductions in spending, coalitions have frequently fallen apart over where those savings should come from. Many public programs and exemptions and deductions in the tax system have broad popular support, or are defended by powerful interests.

The trouble Trump has is that while his administration says the tax cuts will over time pay for themselves, Congress’s nonpartisan budgetary referees at the Joint Committee on Taxation won’t work off that same assumption.

Because of the rules of the Senate, legislation that would result in more borrowing over the long term would be vulnerable to a Democratic filibuster, requiring 60 senators to advance the legislation. Republicans hold just 52 seats in the chamber, and absent those 60 votes, Trump and his fellow Republicans would only be able to pass cuts that would last for 10 years.

After that time, the tax cuts would expire unless Congress takes action, setting up another fight over taxes.

(The Washington Post)

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