A team of researchers from the Urban-Brookings Tax Policy Center analyzed a tax outline the White House made public back in April. Even though there are still a few months left until the final draft is approved, the original document can still reveal some primary goals for Trump administration. The main findings suggested that only the wealthy citizens would benefit from this tax plan.
April’s Tax Outline Presented only Few Goals and Lacked Many Necessary Details
The initial outline of the administration implied a tax cut that would amount to $7.8 trillion costs in 10 years. These numbers were based on the traditional budget scoring. On top of that, a plan that mixes these cuts with revenue bonuses would cost $3.5 trillion. There were no changes to these findings when researchers considered the macroeconomic effects of such strategies.
At the moment, the White House together with House and Senate Republicans is working on a new tax plan. However, all these parties need to reach a unanimous agreement regarding the final draft. The improved outline might appear as soon as September.
On the other hand, TPC had a limited material to work with on their estimations. The tax outline that appeared several months ago was one page long. There were many blanks that contributed to an unclear economic direction. Therefore, the TPC team claimed that their analysis doesn’t have anything to do with the White House’s plan.
“Rather, this exercise provides perspective on the revenue and distributional effects of a plan containing the tax ideas raised by the administration.”
The Analysis Indicate that the Official Tax Plan Can Strike Revenue-Neutrality Only by Avoiding Any Additional Tax Cuts for the Wealthy
The practical takeaways are those findings that indicate that the White House needs a lot more changes in order to avoid a revenue-biased plan. One way to achieve a balanced outcome is to apply the so-called “Mnuchin rule” that asks for no more tax cuts for wealthy taxpayers.
The April’s White House draft stipulated a lower corporate tax rate from 35% to 15% as well as a weaker tax rate for top earners from 39.6% to 35%. On top of that, the tax outline mentioned repeals of the ObamaCare’s net investment income tax, the alternative minimum tax, and the estate tax.
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