|White House Photo of 4/26/17 Release of Trump Tax Plan|
Today, members of President Trump’s cabinet (Secretary Mnuchin and National Economic Director Gary Cohn) released a 1-page list of items he wants in a tax reform plan. CNN has the 1-pager posted here.
A few observations (I’ll have more later):
The plan is quite similar to what Trump talked about and had posted on his website during the presidential campaign.
The plan doesn’t say how tax rates will be lowered for everyone in a revenue neutral manner. While the expectation underlying the proposals is that economic growth will occur to generate more revenue, that’s not an exact science. If “rosy” projections are made, fewer deductions, exclusions and credits have to be cut back to “pay for” the lowered rates. If a more conservative projection is computed, more tax breaks have to be eliminated or cut back. I’m guessing we’ll see very rosy projections of the economic effects of tax reform.
During the campaign his individual tax reform plan matched the House Republican plan for the individual rate structure – 12%, 25% and 33%. This plan always seemed a bit odd as a tax cut to sell to the public because today, the lowest rate is 10% (and the highest is 39.6%).
The rates in today’s release are 10%, 25% and 35%. So, it seems that the Administration realized that it might be hard to sell a tax cut on the premise that the lowest rate today is increased. And, perhaps he is listening to Treasury Secretary Mnuchin who had indicated top rates should not be lowered, as President Trump’s new plan says the top rate would be dropped to 35% rather than to 33% (see story from CBPP).
What do you think?