On Wednesday, President Donald Trump unveiled a one page tax plan proposing deep tax cuts, many aimed at businesses, causing some concern amongst fiscal conservatives and financial markets. The tax plan proposed matched up closely to the promises Trump made during his election campaign. Democrats immediately attacked the administrations plan as fiscally irresponsible.
“President Trump’s tax plan is short on details and long on giveaways to big corporations and billionaires,” Representative Nancy Pelosi stated.
Senate Majority Leader Mitch McConnell, and House Speaker Paul Ryan welcomed the Trump proposals cautiously leaving room for details to change as the legislation evolves. “The principles outlined by the Trump administration today will serve as critical guideposts as Congress and the administration work on tax changes,” both leaders said in a statement.
Though the outline at the briefing lacked detail, experts and analysts have already speculated the potential impact the plan would have on the public. The Committee for a Responsible Federal Budget released a rough analysis predicting the plan could cost $3 trillion to $7 trillion over the next decade, potentially harming economic growth rather than boosting it. White House Budget Director Mick Mulvaney dismissed cost estimates of the plan saying, “There’s no way to score what we put out yesterday. This was general principles, whats important to us and a package designed to get the US economy to 3 percent growth”.
Some key elements from the tax plan include a reduction of the number of tax brackets from seven to three: 10 percent, 25 percent, and 35 percent. This effectively lowers the top rate by nearly 5 percent. The administration has yet to say where those brackets begin and end.
Presidents Trump plan will also double the standard deduction. Its been stated this is intended to put more money in the pocket of the average American taxpayer who do not itemize their deductions.
The Inheritance tax will also be repealed, along with the Alternative Minimum Tax (A.M.T.). According to the Tax Foundation, the United States inheritance tax is the fourth highest in the world. The Trump administration argues that the tax was a burden on farmers and small businesses.
One of the more controversial and more aggressive move in the plan was the administrations proposal to lower the corporate tax rate from 35 to 15 percent. Currently the United States has one of the highest corporate tax rates in the world, and bringing it to 15 percent would make it one of the lowest. Right now very few multinational companies pay the default 35 percent tax rate, thanks to loopholes that allow them to lower their effective tax rates, however corporations have pushed for a tax rate cut for many years. The Tax Foundation has said the rate reduction will reduce revenues by $2 trillion over 10 years, and sees no evidence that the plan will generate enough economic growth to compensate.
Trumps tax plan also urged the adoption of a corporate tax system that would largely exempt foreign profit of US based corporations from federal taxation, as apart of his strategy to bring back some of the billions companies hold in their reserves overseas.
The Urban Brookings Tax policy Center, a Washington policy group, analysis did show the potential for one revenue raiser in the plan presented. The plan would scrap the federal income tax deduction that individuals claim for the state and local taxes they’ve paid. It’s estimated the deduction could be worth as much as $1.3 trillion over the next decade.
After the plan was unveiled, US stocks seemed unaffected by the announcement. Wall Street remains optimistic, but the stock market has stalled lately because of the lack of clarity about Trump’s policies.
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