Donald Trump tax plan helps middle class, business, Steven Mnuchin says

Capitol Hill awaits the promised release of President Trump’s tax plan this week, and lawmakers are hoping for clarity amid a debate roiled with myriad options — and no clear sense that any of the plans are gaining much traction.

Treasury Secretary Steven T. Mnuchin, who’s been meeting weekly with House and Senate leaders on the subject, teased the broad outlines of their plans Monday.

“On the personal side, we’re about a middle-income tax cut and simplification,” Mr. Mnuchin said Monday. “On the business side, we’re about making them competitive.”

But there’s surprisingly little unity about how to achieve those goals within the GOP, much less when Democrats are included.

While both ends of Pennsylvania Ave. have a general agreement on lowering corporate income tax rates, Mr. Trump has stirred the debate by signaling he wants a 15 percent tax rate, or significantly lower than what members of Congress had been considering.

House Republican leaders, meanwhile, have been focusing on a 20 percent “border adjustment” tax on imports, which proponents say would help end an unfair system that discourages manufacturers from making their products in the U.S.

But opponents, which include many of the nation’s retailers and big companies that rely on imports for their businesses, say that costs will ultimately get passed onto consumers.

“It’s relying on some elusive presumptions,” Rep. Claudia Tenney, New York Republican, said Monday on Fox Business Network.

Mr. Trump hasn’t definitively embraced the plan, and GOP Rep. Marsha Blackburn, who has been a relatively reliable ally of the president, said on the network Monday she doesn’t expect to see it in the White House package this week.

But without the border tax, which is expected to raise some $1 trillion over the course of a decade, lawmakers would have to find other ways to make up that money in the immediate future.

One potential carve-out that’s gotten some attention recently is the federal deduction for state and local tax payments. Republicans say axing that deduction would end effective subsidies that disproportionately apply to taxpayers in high-population, high-tax blue states like California, New York and Illinois.

“The deductibility of state and local taxes has always been used as an excuse by the big-city political machines and the Democrats to cover for their tax increases,” said Grover Norquist, president of Americans for Tax Reform.

The nonpartisan Tax Foundation has estimated that eliminating the state and local deduction would raise between $1.7 trillion and $1.8 trillion over a 10-year period.

But New York Gov. Andrew Cuomo said after meeting with Mr. Trump in January that ending the deduction would be “devastating” to states like New York and California, and the proposal is likely to be met with stiff opposition from many Capitol Hill Democrats, who want to deny Mr. Trump a win at all costs.

There are also some differences between the House Republicans’ blueprint and the plan Mr. Trump laid out on the campaign trail. Even a small difference in various rates can translate to billions of dollars that a plan needs to make up elsewhere if it doesn’t end up adding to the deficit.

For example, the House GOP blueprint calls for consolidating the seven current individual income tax brackets into three, with a decrease in the top personal rate to 33 percent from 39.6 percent.

It also calls for the corporate tax rate to be lowered from 35 percent to 20 percent.

Mr. Trump’s plan, meanwhile, had called for the seven brackets to be consolidated into four, with a top individual rate of 25 percent and a corporate rate of 15 percent.

The House is right to tackle individual and corporate tax reform at once, but Mr. Trump is the one who needs to be driving the train, said Douglas Holtz-Eakin, a former director of the Congressional Budget Office (CBO) under President George W. Bush.

“We don’t know where the White House is — for, against or what they want if they’re against. And that’s the most important thing,” he said. “To get it done, you need an enormous amount of presidential leadership and political capital.”