Trump Touts 'Giant, Beautiful, Massive' Tax Plan to Manufacturers

Kip Tom

How do you pay for an estimated $5.8 trillion tax cut?

"At the very center of that plan is a giant, beautiful, massive - the biggest ever in our country - tax cut", Trump said.

Tax reform is the centerpiece of the party's legislative agenda, the one big gift to Americans that Republicans are counting on to make good on their campaign promises. Possibly gone would be people's ability to deduct state and local taxes as well as eligible medical expenses. History suggests that tax cuts never result in higher revenues. The administration contends that the overhaul would bolster the economy and create job growth in manufacturing and other sectors.

While lower taxes are a better alternative to high tariffs to keep businesses in the United States, it will be hard to see $2.4 trillion in realized gains due to this tax cut within the next ten years without cutting spending. But will that actually score you and your family a lower tax bill?

The proposed Republican revised tax code calls for changes to the death tax ("Trump, GOP outline proposal to lower, simplify taxes", September 27). Donald Trump doesn't just benefit from his tax plan; he flourishes under it.

It remains to be clarified how the tax cuts will be compensated for to balance the public accounts and avoid raising the deficit.

TRUMP: As Indiana governor, Mike Pence "signed the largest income tax cut in the state's history" - Indiana speech introducing the plan.

A better way to pass along benefits to the middle class would be to allow those making less than $200,000 to pass on to their heirs some of their Social Security benefits that they paid for over their lifetimes. Furthermore, although the reduced individual income tax rates would slightly diminish the value of the municipal bond subsidy, the repeal of the AMT could offset the diminution in value (as could an increased demand for municipal bonds if they remain one of the few tax-advantaged investments after the enactment of tax reform). This would return about $1.6 trillion to the government.

Second, it would roughly double the standard deduction so that typical middle-class families will keep more of their paycheck.

"For the average family, they don't have enough details yet" to know whether the plan helps them, Tedeschi said.

It also eliminates most itemised deductions with the only deductions specifically preserved in the plan being those for charitable gifts and home mortgage interest. The vast majority of filers go with the standard deduction because their expenses that would be itemized don't exceed $12,600.

"This is about creating a fair tax system that's good for the average, middle class person", said Mnuchin, who pledged that almost every taxpayer would be able to fill out his or her taxes on a postcard. That means that this deduction, largely aimed at the middle class, becomes less valuable each year.

And the whole thing would leave a $2.4 trillion hole in federal revenue in the first decade.

The administration has a ready response to that problem.

The 89-page resolution permits adding $1.5 trillion to the federal debt over 10 years, though its Republicans authors said the federal budget would balance itself out through a combination of spending cuts and increased economic activity they say lower taxes will generate.

For other taxpayers, though, the benefits are far more modest or non-existent, the report finds.

The White House did not immediately respond to a request for comment. That perspective is shared by economists monitoring the financial and credit markets. He is discovering, though the learning curve seems to be a little steep, that he can't do that with the most cantankerous bunch of human beings on the planet, the Republican-controlled U.S. Congress.

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