Thus far, Donald Trump’s presidential campaign has been based on his boasts about his ability to get things done better than other politicians as well as vicious attacks on some of his opponents and members of the media. However, with a view to attempt to flesh out what a Trump Administration would actually do, he released his tax reform plan on Monday. Like most plans coming from the conservative side of the spectrum, it cuts personal income tax rates in exchange for eliminating a great many deductions. The plan has received qualified praise from Grover Norquist’s Americans for Tax Reform and harsh criticism from the left-leaning Citizens for Tax Justice.
Some of the features of the tax plan include:
- Four income tax rates, 0 percent, 10 percent, 20 percent, and 25 percent.
- Three capital gains tax rates, 0 percent, 15 percent, and 20 percent.
- A business tax rate of 15 percent.
- A one-time “repatriation tax” of 10 percent to encourage businesses to bring approximately $2 trillion stashed overseas back to the United States.
- A sliding scale in which deductions except for mortgage interest and charitable giving are reduced as income increases.
- The elimination of the so-called death tax.
- The elimination of the carried interest deduction for some investments.
- The elimination of the alternative income tax.
The reaction to the Trump tax plan depended on where one is on the ideological spectrum.
Americans for Tax Reform liked the plan, with some reservations because of the lack of full business expensing, a plan that would eliminate depreciation and would allow businesses to claim the full amount of expense in a single tax year. ATR also opposes the elimination of the carried interest deduction. The organization likes the fact that the Trump plan would encourage economic growth and job creation.
Citizens for Tax Justice, on the other hand, claimed that the Trump tax plan would constitute a “tax cut for the rich,” the rote phrase that the left always uses to attack tax reform. The CTJ does not support this contention and contradicts the analysis of most others who suggest that the plan would enact a tax increase on many high-earning Americans because of the reduction and elimination of many reductions.
The bottom line is that Trump deserves some praise for putting out a detailed tax reform plan. Ironically, it is quite similar to the tax plan of his main rival, former Gov. Jeb Bush, who also lowers and simplifies tax rates in exchange for eliminating some deductions. Both plans assume increased economic growth as an offset for reduced taxes, scored dynamically.