Under President Donald Trump's proposed tax reforms, individuals and corporations would see lower tax rates, and the number of tax brackets would be reduced, but the reforms would also eliminate most other deductions beyond the standard deduction, charitable contributions, and deductions for mortgage interest.
The standard deduction would be doubled, corporate income taxes would drop to 15 percent, and Trump wants to repeal the alternative minimum tax and the estate tax (a.k.a. death tax). The information available right now is basic. So basic, in fact, that I can toss up an image of the one-page release handed out to journalists who attended the White House rollout, courtesy of Lachlan Markay of The Daily Beast:
There will be plenty to analyze, so stay tuned. One potential point of contention: It would eliminate deductions people claim for paying state and local income taxes, which could impact people who live in states like California and New York. Treasury Secretary Steve Mnuchin said it wasn't the federal government's job to "subsidize" these states.
Veronique de Rugy, Reason columnist and senior research fellow at the Mercatus Center of George Mason University, had a quick initial response:
I am glad to see that the president seems committed to his campaign promise of lowering the corporate income tax rate to 15 percent. He is correct to want to do without being constraint by the fake concept of revenue neutrality. First, deficit neutrality should be achieved through spending cuts rather than revenue increases. Second, experiences around the world have shown that a reduction of the corporate rate pays for itself. Canada and England have dramatically cut their rates and their revenue to GDP have stayed the same. Also, we know that the payoff in term of economic growth will be huge.
I am not too crazy about the president's plan to increase the standard deduction. While it will indeed simplify filing one's taxes for many, I think it is a problem to exclude more people from the tax rolls.
Cutting the capital gain tax rate is good and so is his proposal to end many deductions. Plus ending the death tax and the AMT is excellent. I like the individual tax reform based on what I have seen but where are the spending cuts?
"Where are the spending cuts?" is going to likely be a refrain we'll be hearing a lot from both libertarian and small government conservatives who otherwise have positive feelings about these changes.
As to whether these reforms have a chance to get anywhere, reporters asked Mnuchin whether Trump was going to release his tax returns. Mnuchin's response: he has "no intention." While there shouldn't be a relationship between tax reform and Trump's lack of transparency, it seems clear that his opponents will attempt to use his secrecy as a way of trying to block these changes.