On paper, Donald Trump’s tax plan is very attractive. But ultimately, to deliver on his promises, Trump might have to add about $9 trillion in debt over 10 years. His tax proposal would reduce revenues by $900 billion per year. The accumulated debts will mostly be attributed to Trump’s plan to impose deep cuts to the income tax rate for most people in the United States.
So, what does Trump’s plan entail?
Donald Trump’s Tax Reform Plan
Donald Trump’s goals for tax reform are as follows:
- Tax relief for the middle class
- Grow the American economy
- Simplify the tax code
And Donald Trump plans on doing this without adding to the debt or deficit. That’s a tall order to fill.
How will Trump achieve these goals?
- Single people who earn less than $25,000 a year, or married couples that earned less than $50,000 per year jointly, will not owe any income tax. However, they will be required to submit a one-page form to the IRS that says “I win.”
- Anyone who will pay income tax will fall into one of four brackets: 0%, 10%, 20%, or 25%. This new tax code will also eliminate the marriage penalty as well as the AMT (Alternative Minimum Tax).
- No business of any size will ever pay more than 15% of their business income in taxes. The goal here is to eliminate corporate inversions by offering favorable tax rates in America.
- Death taxes will be eliminated completely.
- The top income tax rate would drop from 40% to just 25%. Households that fall under this category would earn $225,000 or more each year.
Trump says that his plan will not add to America’s debt or deficit because he expects the economy to grow.
Trump notes that he would make up for the difference in a variety of different ways, including:
- Getting rid of certain deductions that benefit the rich
- Creating incentives to bring companies back to the United States
Trump says that his plan would be revenue neutral, but many experts are finding his reform proposal to be hard to swallow. Tax cuts are very large both on the corporate side and the individual side. Roberton Williams, a senior at the Tax Policy Center, said that there are not enough tax breaks to make this kind of plan work.
It’s difficult for economists to estimate how much Trump’s plan would cost, partly because the plan is not specific on which deductions would be eliminated for the highest earners. But many experts say that it would be a major challenge to make up for the plan’s lost revenue.
Trump’s plan is very aggressive, economists say that to get the top rate to just 25% would be a tremendous amount of work. On top of this, Trump would be slashing the number of people who would normally be paying income taxes, and lowering corporate tax rates substantially. The combination of these two makes his plan more expensive.
When asked about how expensive his plan would be, Trump stated that his plan would pay for itself because the economy would grow rapidly.