The right-leaning Tax Foundation released an analysis Monday that said Trump’s campaign would shrink federal revenues by as much as $5.9 trillion over 10 years. His former plan would have done so by up to $12.3 trillion.
The new plan adopts individual tax brackets from the House Republicans’ tax plan, creating three brackets of 12, 25, and 33 percent (down from the current seven brackets). It would also lower the corporate tax rate to 15 percent, eliminate the estate tax, and increase the standard deduction, among other things. Altogether, over 10 years, it would reduce federal revenue by around $4.4 to $5.9 trillion.
One Huge Question, Still Unanswered
That $1.5-trillion gap between $4.4 and $5.9 trillion exists because one big aspect of the Trump tax plan has been unclear: how to tax “pass-through” businesses. In these firms, the owners pay taxes on earnings at individual income tax rates.
In his old plan, Trump had said pass-through businesses would be taxed at 15 percent, the same as the corporate tax rate he’s proposing. However, since Trump released the new version of this plan, his campaign has given two different explanations about how that income would be taxed: one saying it would be 15 percent, the other saying it would be at individual rates, as the New York Times‘ Binyamin Appelbaum has reported.
That makes a huge difference when it comes to revenue. Given the uncertainty, Tax Foundation created two estimates of what the plan could do. If pass-through income is taxed at the lower rate, revenue would shrink by $5.9 trillion over 10 years on a static basis (that is, not including the effects of economic growth). If it were taxed at higher, individual income tax rates, the revenue cut would be nearly $4.4 trillion.
(Monday, Politico reported a new development: “the …