President Trump is getting ready to reveal the beginnings of a tax cut plan he says will provide the biggest tax cuts in our nation’s history.
White House officials have already told us that his plan will lower the top corporate income tax rate from 35% to 15%. An official with knowledge of the plan said the top tax rate for small businesses owners would also be reduced to 15%. The top rate for individuals will be reduced to the mid-30s.
Trump’s tax plan also includes child-care benefits aimed to help low- and middle-income families – a cause championed by his daughter Ivanka – and a significant increase in standard deductions for individuals and families.
Republicans seem open to Trump’s plan, hoping that it will spur economic growth and thus reduce any drop in tax revenue.
“I’m not convinced that cutting taxes is necessarily going to blow a hole in the deficit,” admits Utah Senator Orrin Hatch, Chairman of the Finance Committee. “I actually believe it could stimulate the economy and get the economy moving. Now, whether 15% is the right figure or not, that’s a matter to be determined.”
Others worry the plan will add trillions to the national debt. On Tuesday, the nonpartisan Joint Committee on Taxation said that even temporary tax cuts for corporations would contribute to the deficit.
Investment strategist Ed Yardeni worries about the “special interests” involved in crafting a new tax plan. “This is going to be a real test of whether he’s going to be able to drain the swamp or whether he’s going to pump more water in.”
Hatch and others attended a Republicans-only meeting on Tuesday to discuss Trump’s tax plan with the president’s top lieutenants. GOP lawmakers are currently working under a budget maneuver called “reconciliation” that would allow to them to pass tax legislation without Democratic votes, but only if it doesn’t increase the deficit outside of the 10-year budget window.
In other words, tax cuts that cause a decrease in revenue would either need Democratic support or they would need to have an expiration date.
“Regretfully we don’t expect to have any Democratic involvement in” the tax overhaul, said Senate Majority Leader Mitch McConnell. “So we’ll have to reach an agreement among ourselves.”
Democrats site previous attempts by Republican lawmakers to decrease the national debt, and call them hypocrites for failing to address it now that they are in charge.
“I’m particularly struck by how some of this seems to be turning on its head Republican economic theory,” said Oregon Senator Ron Wyden.
“There’s no question we should try to reduce (the corporate tax rate), but I don’t see how you pay for getting it down that low,” said Pennsylvania Senator Bob Casey. “Fifteen percent, that’s a huge hole if you can’t make the math work.”
The Trump Administration says that tax reform and new trade regulations could push economic growth above 3%.
“There’s no reason that we should not be able to hit that – if not beat it,” said Commerce Secretary Wilbur Ross.