President Donald Trump unveiled a comprehensive tax cut plan Wednesday (Sept. 27) in Indiana, one day after another attempt to pass a healthcare reform bill in Congress failed to muster enough votes.
His tax plan would reduce the number of tax brackets from seven to three, would eliminate the estate tax, would drop the corporate tax rate from 35% to 20%, and would repeal most itemized deductions. It also would expand a tax credit for having children and creates a special low tax rate on multinational companies’ overseas earnings in an effort to incentivize reshoring of jobs and companies to the U.S.
The Committee for a Responsible Federal Budget, a non-partisan, non-profit organization estimates the changes proposed would result in tax cuts of $2.2 trillion.
“These numbers come with a high degree of uncertainty and exclude a number of potential offsets where no details exist. But it is clear that much more work needs to be done to ensure tax reform is fiscally responsible. Given today’s record-high levels of national debt, the country cannot afford a deficit-financed tax cut. Tax reform that adds to the debt is likely to slow, rather than improve, long-term economic growth,” CRFB stated.
Who will benefit most from the tax cuts is unclear and how it will be paid for hasn’t been determined. GOP leaders said they will offset tax cuts with increases elsewhere, but those plans were not released Wednesday. According to several national reports, Republican leaders will take up the increases in committee meetings at a later date, giving opposition groups less time to lobby for changes or to kill the full measure.
The plan would raise the individual tax exemption to $12,000 and the family exemption to $24,000, nearly double the current exemption rates. This increase would take away nearly all deductions and help reduce the complicated tax codes in existence, GOP leaders said. A preliminary analysis by CRFB showed the overall cuts could increase the national debt to more than Gross Domestic Product, GDP, in about 10 years.
“Including interest costs, the plan would cost $2.7 trillion and increase debt to 101% of GDP by 2027, exceeding the size of the economy. Assuming expensing is ultimately made permanent, the cost could rise to $3.7 trillion, resulting in debt reaching 104% of GDP by 2027. These numbers are all well above the 91% of GDP debt that is expected under current law by 2027,” CRFB reported.
Trump has promised the largest tax cut plan in generations since he began running for office more than two years ago. He told a group gathered inside a building at the Indiana State Fair he hopes Republicans and Democrats can come together to hammer out a plan.
“This is a revolutionary change and the biggest winners will be middle class workers as jobs start pouring into our country,” Trump said.
Several in Arkansas’ Congressional delegation praised the tax code reforms, the most dramatic changes proposed in more than 30 years. The largest retailer in the world, Arkansas-based Wal-Mart Stores issued a statement praising the move. The company said a reformed tax code would encourage investment in the United States, help families retain more of their income, and it would make American businesses more competitive in global markets.
“The first district of Arkansas will be looking for a fiscally responsible tax reform plan that significantly lowers taxes for working middle income Americans and their families. I support the President’s goal of making our tax code more competitive to increase economic growth and drive up wages for American workers. Ultimately, our current tax code benefits some at the expense of the many, and Americans should be able to keep more of their paychecks to spend, save, or invest as they so choose,” said U.S. Rep. Rick Crawford, R-Jonesboro.
U.S. Sen. John Boozman, R-Ark., echoed Crawford’s sentiments. Boozman had supported the latest failed attempts to repeal and replace the Affordable Care Act, commonly referred to as Obamacare, but quickly shifted gears to tout the administration’s push for tax reform.
“My colleagues and I are optimistic that the tax reform framework will allow us to ensure that all Americans can keep more of their hard-earned dollars in their pockets, rather than Uncle Sam’s. As I visit with Arkansans about tax reform, I consistently hear they want a tax code that is fair and simple. This framework lays the groundwork for us to meet that goal, while at the same time making America more competitive in today’s global economy. I look forward to working with my colleagues to turn this tax reform framework into straightforward policy that simplifies the tax code, benefits every American and creates jobs at home,” he said.
U.S. Rep. Bruce Westerman, R-Hot Springs, thinks both chambers of Congress will be able to hammer out a bill that can be passed and placed on Trump’s desk in the Oval Office.
“Today, President Donald Trump and the U.S. House of Representatives unveiled details on one of the key components of our ‘Better Way’ agenda – a simplified tax code. We have listened to the American people,” Westerman said. “You told us the tax code is too complex and burdensome. We agree. That is why President Trump and House Ways and Means Chairman Kevin Brady, R-Texas, unveiled an overhaul of our tax code that promotes job growth, doubles the standard deduction, brings an end to the death tax, eliminates corporate tax loopholes, reduces the number of tax brackets, lowering rates for everyone and makes our system more fair for hardworking taxpayers.”
U.S. Rep. Steve Womack, R-Rogers, was also supportive of the framework of the tax cut package.
“Our current tax code is complicated, confusing, and full of special-interest loopholes. It has been 31 years since we have had major reform, and I am optimistic about the unified framework laid out today. Americans deserve to keep more of their hard-earned paychecks and spend less time filing taxes. Tax relief for small businesses is necessary in order for them to grow. The time for tax reform is now, and I am hopeful that this plan will lift the financial burden off of working families while putting America first,” he said.