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POLITICS

White House Proposes Slashing

Tax Rates for Individuals and
Businesses
By ALAN RAPPEPORT and JULIE HIRSCHFELD DAVIS APRIL 26, 2017

WASHINGTON President Trump on Wednesday proposed sharp reductions in

both individual and corporate income tax rates, reducing the number of individual
income tax brackets to three 10 percent, 25 percent and 35 percent and easing
the tax burden on most Americans, including the rich.

The Trump administration would double the standard deduction, essentially

eliminating taxes on the first $24,000 of a couples earnings. It also called for the
elimination of most itemized tax deductions but would leave in place the popular
deductions for mortgage interest and charitable contributions. The estate tax and
the alternative minimum tax, which Mr. Trump has railed against for years, would
be repealed under his plan.

As expected, the White House did not include in its plan the border
adjustment tax on imports that was prized by House Republicans. However, it did
express broad support for switching to a so-called territorial tax system that would
exempt company earnings abroad from taxation but would encourage companies
to maintain their headquarters in the United States.

The plan would include a special one-time tax to entice companies to

repatriate cash that they are parking overseas.

Mr. Trump also signaled support for changes to the tax code that would help
families with child-care costs. His plan also would end the 3.8 percent tax on
investment income that was imposed by the Affordable Care Act.

Trump administration officials called the blueprint one of the largest tax cuts
and broadest overhauls of the tax system in history.

We want to move as fast as we can, Steven T. Mnuchin, the Treasury

secretary, said at an event in Washington as the White House planned an afternoon
rollout of its principles for what it bills as the first overhaul of the tax code in three
decades. This bill is about creating economic growth and jobs.

He vowed it would be the biggest tax cut and the largest tax reform in the
history of our country, in line with Mr. Trumps grandiose portrayal. But there
was no expectation that the White House would elucidate how the deep cuts would
be financed, and administration officials are cognizant of the challenges of pushing
through a proposal that could dramatically add to the national debt.

If, in fact, the proposal cuts taxes but fails to close loopholes or raise some
other taxes, it would not be a true reform of the tax code. It would be a tax cut
along the lines of President George W. Bushs tax measure in 2001 and 2003. Nor
is it clear that it would be the largest in history. Tax cutters from Warren G.
Harding and Calvin Coolidge to John F. Kennedy and Ronald Reagan vie for that
title.

Mr. Mnuchin offered few specifics about the blueprint, other than confirming
that its centerpiece will be a 15 percent business tax rate, which would apply not
only to corporations, but also to small businesses and other large owner-operated
conglomerates, such as Mr. Trumps real estate empire. He also said the White
House is not on board with the border-adjustment tax that is central to House
Republicans tax plan in its current form, setting up an intraparty struggle over
the elements of the plan and how to offset the deep reductions envisioned.

Mr. Trump also wants to increase the standard deduction for individuals,
according to people briefed on the plan, an attempt to fulfill his promises to
provide tax cuts for middle-income people and simplify the process of filing
returns. That proposal is likely to engender strong resistance from home builders
and real estate agents, who fear it would diminish the importance of the mortgage
interest deduction, as well as other sectors that could see the tax benefits
associated with their businesses curbed or eliminated.

And Democrats are gearing up for a fight. Trumps latest proposal is another
gift to corporations and billionaires like himself, said Tom Perez, the Democratic
Party chairman. Trump must release his tax returns, as millions of Americans are
demanding, before Congress can consider any Trump tax plan. We must know how
much Trump would personally financially benefit from his own proposal.

The long-awaited White House blueprint is intended to formally begin the

push to get a tax overhaul done before the end of the year.

Officials have cautioned that the announcement will be light on detail and
should not be viewed as the final word in what is likely to be a mammoth
negotiation. While Mr. Trump has portrayed the effort as a top priority, he had no
plans to appear publicly on Wednesday to roll it out, leaving that task to Mr.
Mnuchin and Gary Cohn, the director of the National Economic Council, who are
to brief reporters at the White House in the afternoon.

The plan contrasts starkly with one that has been championed by House
Republicans, who had proposed paying for their tax cuts in part with the new tax
on imports, an effort to ensure that the measure would not swell the deficit.

But on Wednesday, many Republicans even leading proponents of that plan

insisted they were in broad agreement with the White House on the contours of
a tax rewrite.

I think theres 80 percent or more common ground here weve got some
work to do, said Representative Kevin Brady, Republican of Texas and the
chairman of the Ways and Means Committee. I think the president is going bold
here.

Mr. Mnuchin said this week that the tax changes would spur the economy to
grow by 3 percent, which he said would pay for the vast cuts in federal revenues.
But even Republicans privately concede that stronger growth would not entirely
offset the cost. Democrats scoffed at the notion on Wednesday.

America is a great nation, said Representative Ted Lieu, Democrat of

California, but we havent yet discovered magic. He called Mr. Trumps tax
 proposal mathematically impossible.

Republicans have long called for comprehensive permanent changes to the tax
code, but lately they have shown increasing openness to the possibility of tax cuts
with an expiration date. If they embark on a plan to move legislation that adds to
the deficit and cannot be filibustered by Democrats, Senate budget rules dictate
that the tax cuts would expire after a decade.

The goal is to make it permanent, but theres lots of levers here, Mr.
Mnuchin said. If we have them for 10 years, thats better than nothing.

Beyond cutting the tax rate to 15 percent for large corporations, which now pay
a rate of 35 percent, Mr. Trump also wants that rate for a broad range of firms
known as pass-through entities including hedge funds, real estate concerns like
Mr. Trumps and large partnerships that currently pay taxes at individual rates,
which top off at 39.6 percent.

Acknowledging concerns that such a move could potentially be used as a tax

shelter, Mr. Mnuchin insisted on Wednesday that the administrations plan would
not be used as a loophole to allow people to pay less tax than they should be
paying.

The concern would be that lawyers, doctors, consultants or other wealthy

people in partnerships could structure much of their personal income as business
income, effectively reducing their tax rate from 39.6 percent to 15 percent.

We dont need a tax plan that allows the very rich to use pass-throughs to
reduce their rates to 15 percent while average Americans are paying much more,
Senator Chuck Schumer of New York, the Democratic leader, said Wednesday.
Thats not tax reform. Thats just a tax giveaway to the very, very wealthy that will
explode the deficit.

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