Experts are already taking issue with president Trump‘s newly-released tax plan — in particular the White House’s claim that economic growth would offset huge losses in government revenue from the proposed corporate tax cuts.
The plan calls for the corporate tax rate to be slashed from 35 percent to 15 percent. And the new plan would consolidate the seven tax brackets for individuals and reduce them to only three brackets: a 10-percent bracket, a 25-percent bracket and a 35-percent bracket.
Right now, the highest individual federal income tax rate is just shy of 40 percent. Trump’s plan also doubles the standard deduction, meaning that a married couple would pay no taxes on the first $24,000 they earn.
The plan, summarized on just one page to reporters at the White House, lacks many of the details needed to make projections about its long-term effects.
Alex Raskolniknov, a tax professor at Columbia Law School, was alarmed by the lack of precision in the plan. “If this were any other president, this would have been a huge embarrassment of a “plan,'” he wrote to ABC News. “He’s had more detail in his tax plan when he was running for president. What was all the hype about this time? … It’s hard to take this seriously … except it comes from the President of the United States.”
And every expert who spoke to ABC News said that the plan would result in a large drop in federal government revenue and a spike in the federal budget deficit.
“This is all candy and no vegetables,” said Marc Goldwein, Committee for a Responsible Federal Budget. Goldwein said he thinks a 25-percent to 28-percent corporate tax rate would strike a good balance between economic competitiveness and fiscal responsibility.
Economists have estimated that Trump’s tax plan could cost between $2 and $7 trillion over the next decade. An analysis by the Tax Foundation, a nonpartisan think tank in Washington, D.C., concludes that a 15 percent corporate tax rate would reduce federal revenue by about $2 trillion over a decade, while the Urban-Brookings Tax Policy Center puts that estimate at $6 trillion. The bi-partisan Committee for a Responsible Federal Budget offers a range of costs from between 3 and 7 trillion dollars in lost revenue over the next decade.
“This is probably not to be taken seriously. It’s too huge a revenue loss. It is so fiscally reckless that it appears to be willful sabotage of the U.S. economy,” said Daniel Shaviro, a tax professor at NYU Law School.
Economist Doug Holtz-Eakin, who lead the Congressional Budget Office under former President George W. Bush, agreed that the economic growth won’t be enough to offset the massive loss of revenue.
“Passing genuine tax reform would include structural changes. As long as those are not included, it is not reform. This bill as presented would add to the deficit. Growth alone cannot account for the loss of revenue from tax cuts. This means it cannot pass the reconciliation process and will…