Republican presidential hopeful Donald Trump pitched a large-scale — but not revolutionary — reform of the tax code Monday, proposing to slash income taxes and consolidate rates into four income brackets.
Trump released the plan at a news conference at Trump Tower in Manhattan, countering regular complaints that the billionaire has offered few specifics about what he would do if elected president.
Under Trump’s plan, the top income tax rate would fall from the current 39.6 percent to 25 percent. That rate would be for income above $300,000 for joint filers, $150,000 for single filers.
Rates would go down from there to 20 percent — for joint filers earning $100,000 or $50,000 for single filers — to 10 percent, and then eliminate income taxes on couples earning $50,000 or less, or $25,000 or less for single filers.
Trump would reduce the corporate rate to 15 percent, from 35 percent, and end the estate tax. Capital gains rates would still top out at 20 percent.
The real estate magnate and polling front-runner said the plan is “revenue-neutral” because he would get rid of many exemptions and deductions. But it keeps two of the most expensive deductions: charitable giving and mortgage interest.
Trump says much of the federal revenue hole would be filled by a one-time 10 percent “repatriation tax” on corporate cash held overseas — which reportedly exceeds $2 trillion — that companies do not want to bring back to be taxed at 35 percent. Some congressional leaders want to use a repatriation “holiday” now to pay for road construction.
One aspect designed to show Trump is willing to hit the rich would be an end to a “carried interest” loophole that allows hedge fund managers to have their income taxed at the lower capital gains rate.
But Trump’s new 25 percent top rate is not far off from the 20 percent capital gains rate for top earners now. And lower overall tax rates and the elimination of the estate tax would greatly help some wealthy taxpayers.
“There will be people in the very upper echelons that won’t be thrilled with this,” Trump said. “This is actually a tax reduction, a big tax reduction, including for the upper income. I believe the economy will be doing so well that even though they won’t be getting certain deductions, which aren’t fair for them to be getting, they will end up doing better.”
There were elements of Trumpian flair: Those in the zero-percent tax bracket could send a form to the Internal Revenue Service saying “I Win.” But the plan is hardly the tax code revolution many in the GOP base desire.
Georgia Republican U.S. Sens. Johnny Isakson and David Perdue, for example, want to move to a 23 percent standard federal sales tax to replace the income tax, a plan known as the FairTax. Others favor a flat income tax — with the same rate — that everyone pays.
Trump’s plan is not much different in general structure than former Florida Gov. Jeb Bush’s proposal, though Trump’s has lower rates.
Trump pointed out that he is a poster boy for some of his own proposals, since he has stocked “millions” overseas and has used tax loopholes. That was because he does not like the way the country’s current leadership spends his tax money, he said.
“I pay a lot of tax, but I fight like hell to make it as low as possible,” the polling front-runner said. “But I would feel quite differently if our leadership was such that I respect their decisions.”
Americans for Tax Reform, the purveyor of the no-new-taxes pledge that has become Republican orthodoxy, signed off on the Trump plan. The group opposes closing the "carried interest" loophole, but it was pleased that Trump's change would only go after "hedge fund guys," as Trump put it, and not private equity firms.
“Trump’s plan is certainly consistent with the Taxpayer Protection Pledge,” said Grover Norquist, the group’s leader. “Trump has said he opposes net tax hikes and has made clear that the real problem is spending. This plan is a reform, not a tax hike.”
The Club for Growth, a conservative group that has been attacking Trump with television ads for past positions it deems to be liberal, said his tax proposal constitutes a flip-flop from Trump’s 1999 plan to assess a one-time net worth tax on people worth more than $10 million to pay down the national debt.
“Had (Democrats) Hillary (Clinton) or Bernie (Sanders) released a similar plan, it would be met with overwhelming skepticism,” Club for Growth President David McIntosh said. “Records matter, and Donald Trump has a long history of calling for the largest tax increase in U.S. history … and of using (President Barack) Obama-like rhetoric to claim that higher taxes should be imposed on those he deems worthy of such punishment.”
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