The voices of Tax Policy Center's researchers and staff
We know that President Trump wants to make major changes in the tax code. But while the Administration has released broad outlines, it has not specified many of the changes he favors. The Tax Policy Center plans to analyze the cost and distributional effects of a plan consistent with the Administration’s latest ideas. But first TPC needs to flesh out important details.
In a new brief, TPC summarized the Administration’s proposal and described some of the key assumptions it is making as its prepares to analyze a tax framework that generally tracks the White House’s ideas. TPC can’t model the president’s tax plan precisely since no one, perhaps not even his staff, has filled in the key details. But TPC can sketch out the effects of a proposal that conforms to the president’s stated aims.
To start, TPC put the Administration’s ideas in three buckets: Those that are well-described; those with that are missing key details; and those that Trump proposed in the past that may or may not be on the table today.
For example, the Administration wants to cut tax rates for individuals and businesses, repeal the estate tax, and eliminate certain tax preferences. However, its most recent tax policy document, a one-page outline released on April 26 and largely restated in its May budget, left out many key details.
- While the White House proposed individual income tax rates of 10-25-35 percent, it did not describe the income ranges to which those rates would apply. TPC is assuming that Trump is sticking with the brackets he favored during the presidential campaign.
- The Administration proposed a 15 percent rate on partnerships, sole proprietorships, and other pass-through businesses, but said little about how such a provision would work. TPC is assuming the 15 percent rate applies to all pass-through income and that it is a cap. Thus, someone in the 10 percent bracket would pay at 10 percent and someone in the 35 percent bracket would pay at 15 percent.
- Its most recent plan promised to repeal the estate and gift tax. During the campaign, Trump coupled this idea with taxing at death capital gains in excess of $10 million. TPC is assuming that Trump still supports that new tax.
- The White House outline promised to repeal “special interest” business preferences and some individual deductions but preserve deductions for home ownership and charitable giving. TPC is assuming the Administration will retain those two deductions, eliminate all other itemized deductions, and leave untouched other deductions, credits, and exclusions. For businesses, TPC is assuming the domestic production deduction and most credits would be repealed but other preferences would be kept. For instance, tax treatment of insurance companies, credit unions, and oil and gas producers would remain unchanged.
Finally, the April outline was silent on other major tax changes Trump proposed during the campaign. For example, we don’t know if he still wants to repeal the personal exemption and head of household filing status. Similarly, we don’t know if he‘d still tax distributions from large pass-throughs as if they were corporate dividends.
The President has left many questions unanswered. But in the service of transparency, TPC wants to make its assumptions public before it analyzes a plan consistent with what the Administration has described. And it would be happy to incorporate any additional details the White House can provide.
Posts and comments are solely the opinion of the author and not that of the Tax Policy Center, Urban Institute, or Brookings Institution.
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