Trump’s plan would blow huge hole in budget, analysis shows

Printed from:

Donald Trump’s plan to cut taxes would zap almost $12 trillion from federal receipts over 10 years, swell budget deficits to an even greater degree,  and deliver the biggest benefits to the wealthiest 1 percent of Americans, according to an analysis released Tuesday by the Tax Foundation in Washington.

On the plus side, the nonprofit organization that analyzes tax policy said the Republican presidential candidate’s plan would create 5.3 million more full-time jobs than would be generated by the economy without the cuts. It also said that the nation’s economic output would be 11 percent higher over a decade, and wages would be 6.5 percent higher, “provided that the tax cut could be appropriately financed.”

Conceding Trump’s main objective, the foundation said, “The plan would cut taxes and lead to higher after-tax incomes for taxpayers at all levels of income.”

The New York developer and television personality released his plan Monday. It calls for reducing the top personal income tax rate to 25 percent from 39.6 percent now, and cut the rate on corporate profits to 15 percent from 35 percent.

After taking into account the growth-spurring effects of the dramatic tax cuts, the impact on federal revenue would be diminished, the foundation said, but it would still cut receipts by about $10 trillion. Appearing on “The O’Reilly Factor” television show Tuesday night, Trump responded to questions about how he would pay for the tax cuts by saying he would make deep cuts in the Department of Education budget and at the Environmental Protection Agency.

Touting his plan, Trump’s campaign website said Monday it would widen the proportion of Americans who would not owe any taxes by almost 75 million households. It would do this by raising the tax-free income limit to $50,000 for a couple and $25,000 for an individual.

Also, Trump said his tax plan would cut the number of income brackets to four from seven, with tax-rate demarcations at 10 percent, 20 percent and 25 percent. And no business would pay more than 15 percent of income.

The plan would also eliminate estate taxes, the alternative minimum tax and the “carried-interest” treatment that often lets high-earning investors avoid paying income taxes on much of their gains.

The foundation said another effect of Trump’s plan would be a 29 percent boost in capital investment over the next decade, which could also help increase the number of jobs created. It said the average gain in taxpayer income would be 10 percent.

But the benefits of his plan would be spread unevenly, the organization said. Most of the reduction in taxes paid would go to the wealthiest Americans, a group that includes the candidate.

“The top 1 percent of all taxpayers would see a 21.6 percent increase in after-tax income,” the foundation said. That would translate to a gain of 27 percent in after-tax income. By comparison, those with the lowest earnings would see gains of less than 1.5 percent, and less than 9 percent for middle-income taxpayers.

When the ongoing effects of the cuts are factored in, the boost increases for those who earn less, The gains would be from 10 to 12 percent for the lowest income group, while for middle-income taxpayers they would range from 14 to almost 20 percent. But the “one percenters” would still get about 27 percent more in adjusted gross income, the analysis says.