Republican front-runner Donald Trump’s tax plan came under fire Tuesday from a business-oriented think tank, the Tax Foundation. The group reported that Trump’s plan would increase the deficit by $10 trillion dollars. This would increase the national debt by over a third. His plan would increase the deficit two or three times more than other Republican plans.
Trump introduced his tax plan Monday, hoping to show critics that he has detailed positions on issues. In the announcement, Trump said that his plan would cut taxes for nearly everyone, create jobs, and help the U.S. economy. He assured the media his plan would be revenue neutral and not increase deficits, which he called already too large.
The analysis by the Tax Foundation debunks Trump’s claim that his tax plan would not add to the federal government’s long-term debt. The Tax Foundation said that Trump’s proposal would increase deficits by about $10 trillion over the next decade, even after accounting for the additional economic growth it would generate.
Scott Hodge, the Tax Foundation’s president said the Trump plan is by far the biggest tax cut of any of the other announced Republican plans. The group found that the Trump plan would increase deficits by $12 trillion when its economic effects are ignored and $10 trillion when they are figured in. By comparison, Marco Rubio’s plan would cut taxes and increase deficits by $1.7 trillion, Jeb Bush’s by $1.6 trillion and Rand Paul’s by about $1 trillion. Some have characterized Trump’s plan as George W. Bush’s plan on steroids.
Like President George Bush’s tax cuts, which turned a balanced budget with surpluses into huge deficits, the rate reductions in Trump’s plan are so large that it’s hard to find enough raisers to offset them. The Trump plan would lower the top rate for individuals to 25% from 39.6%, and the top rate on all business income to 15%. The current top corporate rate is 35%. The plan also would place a 0% rate on incomes of $50,000 or less for married couples, $25,000 for singles. The 0% rate by itself cuts government revenues by $4.7 trillion, a Tax Foundation analyst said.
“In nearly every case Donald Trump is more generous to the taxpayer and less generous to the government” than other GOP candidates who have proposed detailed plans, said Mr. Hodge, the Tax Foundation’s president.
During the campaign, Donald Trump often sounded like a populist when he spoke about taxes. He said he will take on “the hedge fund guys” and their carried interest loophole. He said it is “outrageous” how little tax some multimillionaires pay. But his plan calls for major tax cuts for the richest Americans — even the hedge fund managers he railed against on the stump.
Another large, tax cut in Trump’s plan is a reduction in the maximum tax rate on “pass-through income” to 15 percent. Currently, this income is taxed at the same rates as wage income, up to 39.6 percent. Pass-through income is often described as “small-business income,” but that term can be misleading. Those small-business owners would enjoy this tax reduction from Trump, but so would the owners of large businesses that may also choose to use these same ownership structures.
Many people with low-to-moderate incomes would see their income tax bills reduced to zero, increasing the share of the population that pays no income tax at all, which Mitt Romney called the 47 percent. Trump would also eliminate estate taxes giving his own children a tax cut of nearly $3 billion dollars based on his stated net worth of $10 billion dollars.
Trump said he would offset these massive tax cuts on the wealthy by closing loopholes. He refused to specify which loopholes he would close. Instead, he told reporters that he “fights like hell” to use loopholes to reduce his own taxes.
Jeb Bush and other Republicans have also blasted Trump’s tax plan calling it unrealistic. Expect Republican candidates to attack Trump’s plan in the next debate. Also, expect more media scrutiny on the plan in coming days.