I don’t have time to do this justice, but “Oy!” is Trump’s new tax plan a mess!
Let me put it this way, ala The Princess Bride: This “taking on the hedge fund guys” and going after the “outrageous” tax breaks enjoyed by millionaires. I don’t think it means what you think it means.
The Donald cuts taxes on everyone, though the biggest cuts by far are at the top of the scale. Citizens for Tax Justice banged out some preliminary analysis, and as you can see, the plan hugely rewards those in the top 1%, average income: a cool $1.8 mil.
Oh, um…when you cut taxes a ton on everyone, you lose revenue. CTJ says the plan will cost the US Treasury $10 trillion over a decade. You can sprinkle all the supply-side fairy dust you want on that–it won’t change the basic result.
Trump proposes to cut the corporate rate from 35% to 15%. He’d get rid of the estate tax. He cuts the cap gains and dividends rate from 23.8% to 20%.
There’s also one particular wrinkle that looked to me to open a massive new loophole: taking the tax rate on business pass-through income down to 15%. Such income is currently taxed as regular, earned income, for which the top rate is now about 40% (though the top income tax rate in Trump’s plan falls to 25%). In other words, everyone in the top bracket now has a strong incentive to become a small biz. Anyone with a tax lawyer facing an income tax rate above 15% will want to their employer to classify them as an independent contractor. (Note: CTJ didn’t have time to incorporate this idea into their estimate, which would have made it most costly and more regressive.)
I’d consider this maybe the worst tax idea so far in this election season…except there’s Marco Rubio’s proposal to zero out any taxes on capital gains and dividends. Close call, but CBPP tax expert Chuck Marr assures me Rubio’s is both a bigger revenue loser and more regressive.
I liked the fact that Trump proposes to end deferral on foreign earnings by multinational corps, but as Josh Barro points out:
By demanding immediate tax on foreign profits, Mr. Trump’s plan would disfavor American companies that locate their businesses abroad, which is consistent with his broader theme of pushing companies to return factories and jobs to the United States. However, because he would cut the corporate income tax rate so steeply, the effects of immediate worldwide corporate taxation would be limited: Companies get a credit for tax paid to other countries, so Mr. Trump’s tax would apply only on foreign profits that were not subject to tax by a foreign country at a rate of at least 15 percent. This would mostly affect income earned in tax havens, as most major countries have corporate income tax rates of more than 15 percent.
In other words, Mr. Trump’s worldwide tax plan would have no effect on Ford’s choice to make cars in Mexico, so long as they’re paying at least 15 percent in tax to Mexico on their Mexican activities.
Ah well–another rich candidate for president just proposed another big, revenue-losing, regressive tax plan that cuts their own taxes way more than that of the folks they claim to be fighting for. Or, as we call it, Monday in DC!