President Donald Trump will propose the largest tax cut in the country’s history as a way to spark sustained 3% economic growth, U.S. Treasury Secretary Steven Mnuchin said Wednesday.
Here is the full text of the tax-reform principles.
Goals for Tax Reform
- Grow the economy and create millions of jobs
- Simplify our burdensome tax code
- Provide tax relief to American families—especially middle-income families
- Lower the business tax rate from one of the highest in the world to one of the lowest
Individual Reform
- Tax relief for American families, especially middle-income families:
- Reducing the 7 tax brackets to 3 tax brackets of 10%, 25% and 35%
- Doubling the standard deduction
- Providing tax relief for families with child and dependent care expenses
Simplification
- Eliminate targeted tax breaks that mainly benefit the wealthiest taxpayers
- Protect the home ownership and charitable gift tax deductions
- Repeal the Alternative Minimum Tax
- Repeal the death tax
- Repeal the 3.8% Obamacare tax that hits small businesses and investment income
Business Reform
- 15% business tax rate
- Territorial tax system to level the playing field for American companies
- One-time tax on trillions of dollars held overseas
- Eliminate tax breaks for special interests
Deep Cuts and Loose Ends
The Wall Street Journal reports Trump Calls for Deep Cuts in Business Taxes, Changes for Individuals but many loose ends remain.
The plan largely hews to tax-cut proposals Mr. Trump made during his presidential campaign last year, but it includes several crucial changes. Most notably, Mr. Trump is proposing to repeal a provision of the tax code that allows individuals to deduct the state and local taxes they pay from their reportable income. That will hurt residents of high-tax states such as New York, New Jersey and California and spur objections from some Republican lawmakers in those states.
The corporate tax rate would drop to 15% from 35%, and U.S. companies would owe little or no U.S. tax on their future foreign profits. The tax rate on business income reported on individual returns would also drop to 15% instead of being taxed at individual tax rates.
Mr. Trump’s plan leaves several crucial issues unresolved, including whether companies could immediately write off capital expenses, where to set the one-time tax rate on U.S. companies’ stockpiled foreign earnings, how a break for child care would be structured and where the tax brackets for individuals would be set.
Mr. Mnuchin said the tax cut would be the biggest ever. Asked how he measured that, he pointed to the size of the rate cut for corporations from 35% to 15%.
Democrats said the plan appeared heavily tilted toward high-income households. They pointed to lower rates on individuals, the 15% rate for pass-through businesses and estate-tax repeal as significant benefits for some the wealthiest taxpayers.
Senate Democratic leader Chuck Schumer of New York said the proposal to cut tax rates for pass-through businesses would just benefit high-income people like the president himself.
Most U.S. businesses are pass-throughs, called that because their income and deductions pass through to their owners’ individual returns. That group includes many small firms, but also large global law firms, hedge funds and the GOP president’s own real estate and branding businesses. These businesses don’t pay the corporate tax rate.
Reform or Tinkering Around the Edges
If the proposal passes as is, I will benefit via lowering of taxes on pass-through income. So will many small businesses.
I would have proposed something completely different. I had been meaning to write it up and will do so soon.
Mike “Mish” Shedlock
Obviously, DJT is a “deficits don’t matter” kinda guy.
$trillion deficits tout suite … with no looking back.
NIRP ——> here we come!
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deficits only matter as they relate to any slack in the utilization of real economic resources. Govt should spend as much as necessary to ensure full employment with out regard to meaningless numbers on a meaningless “debt clock”.
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…and mindless pseudo babble only matter as a means to excuse government and banksters wresting control of an ever growing share of whatever dwindling output the productive classes still bother producing….
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completely different subject. I’m only trying to educate you as to how the current system functions. If this triggers you then my apologies. Continue with your regularly scheduled deficit hysteria.
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The current “system” doesn’t function.
In the real world, there is no magical number floating around called “full employment.” Pay someone “fully employed” a trillion for another minute of work, and they’ll likely stick around for another minute.
Neither is there some kind of magic “utilization of economic resources” number which can somehow be “slack” or “not slack.”
All that is, is simplistic pseudo jargon, aimed at fooling the uncritical and unreflective into falling for the age old “government needs to take control over ever more of people’s economic output” scheme. Nothing more.
All an economy is, is a means to describe people trading with one another. I produce something you get to consume, and you do the reverse. Or A trades with B who trades with C. Anything consumed, has to first be produced.
The fact that I call myself “the government” doesn’t somehow make it possible for me to consume (aka spend) things that has noone has produced. So the more I spend without producing anything in return, the more someone else has to produce without getting to spend it.
If I have more/bigger guns than the rest, I can force this outcome. Either directly, or by a sleight of hand by which I simply force most/all trade and savings to take place in a medium I can cheaply produce, but that everyone else is banned from producing. That way, I can spend as much as I like without producing, by simply debasing the value of that which everyone else gets in exchange for their hard work.
But that is all “government can spend as much as they want” just because they have a printing press and the guns to force others to accept the press’ output, means. Nothing more. Just the simplest of all simplistic obfuscations for confiscating that which others produce, in exchange for nothing. Without having too resort to the kind of direct gun-in-the-face demands that look scary on the idiot tube.
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“Govt should spend as much as necessary to ensure full employment with out regard to meaningless numbers on a meaningless “debt clock”.”
…
Care to point to evidence that it works?
What do you think Japan has been doing?
DOES NOT WORK
http://www.tradingeconomics.com/japan/government-spending-to-gdp
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Presumably the whole plan turns on 3% growth generating revenues to compensate for the revenue lost from cutting taxes.
If it works a whole host of Western governments will have a lot of hard thinking to do.
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Back in 1980 Bush Sr derided supply economics as “voodoo economics”
Spot On
I ain’t ever seen one of these deals anywhere close to revenue neutral.
Back in W’s 1st term the CBO (under holtz eakin) did a study on voodoo economics. The new taxable growth only replaced between 8% to 22% of lost revenue from tax cuts.
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Should be happy with just that… but as you know the government has to succeed in making sure everybody gets their share of what everybody is up to… and if everybody doesn’t contribute to anybody who is organizing that, that anybody cannot be an everybody, just somebody like everyone else.
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The US govt is not revenue constrained and as such does not need to tax in order to spend. “paying” for tax cuts is not necessary in a modern fiat monetary system.
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…..because if I own nothing and produce nothing, I can just spend like Trump indefinitely, simply by calling myself a government, and adding zeros to some spreadsheet column. It’s sooo easy! Why don’t everyone stop worrying and just do that instead?
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Now your starting to get it! Of course you can close your eyes and keep clicking your heel together in hopes we go back to the gold standard when everything was awesome!
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Best I can say for your naivete, is that it is a nice indirect support for anarchism:
If everyone is their own government, everyone can just spend as much as they want, without having to do any productive work at all!
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Not currently revenue constrained. But when interest rates rise from the current ~0%, it will be a whole different story (not even considering the rising costs of entitlements).
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Interest rates are what the CB says they are. The bond market does not decide interest rates. The fed has an infinite checkbook to keep rates where they want them. RE: Japan, EU. “payments” on interest are nothing more than keystrokes. There is no such thing as unfunded entitlements when you are the monopoly issuer of your own currency. The Govt doesn’t have to borrow its own IOU’s from you or anyone else.
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“The tax rate on business income reported on individual returns would also drop to 15% instead of being taxed at individual tax rates.”
….
The rich getting richer.
Will the Democrats go along?
The guy in the street: ‘why don’t you cut my damn payroll tax, if deficits don’t matter?’
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only little people pay payroll taxes
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Most dem lobbyists can organize as a business as well. So they’ll go along. After pretending to put up a fight, for their own section of the peanut gallery.
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Outstanding. The reduction in corporate tax rates will open up a lot of room for more stock buy backs and debt. The added debt and money in the economy should keep interest rates low for longer. And I’m loving the idea of massive increases in the budget deficit. More pressure to keep interest rates low and more money to purchase low cost Chinese and Mexican products. Thank you conservatives! This will show Obama how real Americans run a government!
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It does seem pretty obvious that the usual suspects are behind this tax plan.
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That’s right, go ahead and blame the voters again.
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The reduction in the corporate tax rate is a good idea that will encourage investment. Reducing the rate on C Corps that are personal services corporations, as this proposal seems to do, also makes sense as it facilitates the growth of engineering, accounting, etc. firms by allowing them to retain earnings. If they do so under current tax law, those earnings are taxed at 39.6%, a major impediment to internally-funded growth. When those earnings are passed on to owners (stockholders) as dividends they are taxed a second time.
However, allowing business owners to avoid personal taxes on their income by subjecting it to a 15% tax rate is ridiculous and a total budget buster. That is what Brownback pushed through in Kansas, causing a major hemorrhage to the state budget.
The US tax code needs reform, not further stupidity.
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Avoiding stupidity is not one of traits of government.
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The territorial stuff is epic
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Agree with this. A participation exemption on dividends (and hopefully capital gains) from holdings of foreign corporations (together with restrictions on base eroding the US tax base) would go a long way to restoring competitiveness of US multinational corporations with foreign competitors, without requiring a lowering of the corporate tax rate.
It is especially problematic to have a corporate/pass through rate which is so much lower than the personal tax rate, as this encourages indefinite deferral of earnings (the opposite of what territoriality was supposed to accomplish).
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This will be like O’bamacare repeal, only more so.
PS When I first scanned the headline I thought it said “Trump releases taxes” and I knew that was impossible.
Trump’s got the batting average of a utility infielder.
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Batting AVERAGE is for LOSERS…
but being Hugely BATTY…
that NOW, is Presidential.
“I would have proposed SOMETHING COMPLETELY DIFFERENT” —Mish
This leads me to the conclusion that Monty Python foresaw a Trump Presidency:
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I don’t support any tax scheme whatsoever but a graduated national sales tax that replaces all current tax nonsense makes some sense to me.
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Given the deficits (both annual and cumulative) and the desire of one side for more military spending and the other side for more social welfare freebies, “replace” will never be an option. Any national sales tax, border adjustment (import tax), etc. will be become just another permanently escalating burden.
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I think a graduated national sales tax has advantages other taxes don’t:
You can control your tax burden somewhat by not buying so much.
The compliance costs would be very minimal – not the work output of three million people – since the infrastructure is mostly in place.
Most every purchase would be included though food and health care would be exempt with limits. A sales tax on stocks and such could be introduced gradually with the interesting result that elites who are enriched by the government created and run system would pay more than an everyman for the same stock and that algo trading would largely disappear.
Small businesses would benefit.
An AI system could be used to find the level of government interference least harmful to real economic growth. A sane, self-driving economy perhaps.
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A tad too totalitarian for my taste. An Obamacare-style income algo mechanism attached to every transaction in the economy means USA.gov would have to criminalize old-fashioned cash-on-the-barrelhead transactions. Every transaction would have to be registered and require permission. If that is not the definition of a totalitarian police state, I don’t know what is. NSA and USA.gov would no doubt love it, as VW-style algo tweaking could reap huge benefits for favored parties. Also, a “no transactions list” similar to the “no fly list.” Bipartisan support.
But can’t see how small businesses benefit from people reducing purchases. In Japan, the gov is raking in more sales tax income every time it raises rates, but businesses are not selling more goods. If anything, price deflation of goods as sales tax rates inflate. California’s 10% sales tax means it takes $1.10 to purchase $1.00 in goods (compared to no-tax states), and adding on a national tariff would only boost the size of government at the expense of standards of living. USA.gov spending has to shrink, with fewer bloated bureaucracies belching up rules and regulations. Asking people to reduce spending so USA.gov can spend more works best in wartime, which is perhaps the permanent footing of USA.gov with its perpetual wars (drugs, poverty, terror, racism, religions, gender, guns, bathrooms, foreign countries, etc.).
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The totalitarian surveillance state is just around the corner and the income tax will become even more of a weapon than it is now.
Almost all states currently have a sales tax. They are far less invasive than an income tax, far less costly to comply with and collect. Informal sales aren’t taxed. Incomes would be reported as in a bracket, rather than an amount, by your employer or you if self-employed.
Of course small businesses would benefit. Lobbying for income tax preferences would be DOA. Small businesses would pay a lower sales tax, big businesses a higher tax. High time preferencers would still spend and low time preferencers would still save.
There isn’t any way to fix government. The best thing you can do is screw over the people who get rich off of it.
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@fingerhole — if you think a national sales tax would be in place of, not in addition to, income taxes… then I have some bridges and swampland to sell you.
The problem is the lack of leadership in Congress, each party worse than the other.
How about a tax on Congress members and their staff? The longer they stay, the higher their tax?
How about a tax on lobbying? And higher taxes on speaker fees, book royalties and other ways to bribe politicians under a different name?
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It probably would be Donald Trumped by the powers that be.
So we’re left with Bolivarian antiprosperity, war, or being replaced by our own creations.
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Sales taxes are at least as invasive as income ones. Certainly no better. The only semi justifiable taxes, are a straight across the board tariff, and a property tax. Simple, just, efficient, and devoid of any spying the government wouldn’t need to be involved in, even absent those taxes.
Any tax on activity requires completely unjustified spying, along with a massive resource drain due to compliance, and all manners of dimwitted attempts by the well connected to try getting “their” activity classified as something that is not taxed. In the case of a sales tax resulting in that which your neighbor sells being taxed, while that which Goldman Sachs sells, not being taxed; guaranteed.
So again, 10% tax on real property within America, no exceptions whatsoever. 10% tariff on anything crossing the border inbound, up to and including the suit you are wearing. Again, zero exceptions. Simple as heck, and as fair as can be. Then, government can live with whatever revenue those two generate, whatever that may happen to be.
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I’ll support a sales tax if there is a law requiring Congress to balance spending, and violation means every member automatically gets thrown out, banned for life from running again, and all their personal assets (and spouse) get confiscated. No appeal process.
Congress must have skin in the game.
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A complete, 100%, federal default, following a passed bill stating that no administration will ever be held accountable for any debt incurred by previous administrations, is about the only way to achieve balanced budgets in practice. Until creditors take it on the nose for real, they’ll continue to facilitate deficit spending, correctly expecting tax payers to take it on the nose for them indefinitely.
Regardless of subsequent tax system, the above would be a huge boon. No Federal debt, and no deficits going forwards.
But independent of that, any tax system that requires some dude with orange hair to spy on a kid, to make sure she reports the fact that some kind neighbor gave her a penny in exchange for a glass of lemonade, will still never be anything but an insult to freedom, decency and anything else that is worth bothering with.
Whereas “As a nation, we have to control the border by inspecting what crosses it inbound anyway, so we may as well charge for it, and mark up that charge a smidgen”, and “The main service government serves is to protect people’s private property, so it only makes sense that those who wants theirs protected, should be the ones paying,” is about as easy to justify as taxes can possibly get.
And, since you always have the option to buy locally made, and to have a go at protecting your own property against the hordes if you dont feel like paying the government, neither tax require any spying whatsoever. Just pay for service, for those who want those fairly basic and universally accepted services of their government.
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Your Gold Money gold chart is not giving gold price in US dollars.
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Will it pass?
What’s baked in the SP500 EPS cake already?
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“Repeal the 3.8% Obamacare tax that hits small businesses and investment income”
Can someone explain to me, why there is no mention of the Obamacare individual mandate, i.e. paying an ever-escalating (annually) IRS penalty (a tax) for not purchasing health insurance? That alone would boost the spending power of many Millennials already saddled with heavy college debt. Would the GOP rank and file bolt at boosting Millennial spending power? Is that some kind of strategic bipartisan goal, keeping the Millennials enslaved? Is this some kind of “third rail,” and is the individual mandate and tax penalty sacrosanct and untouchable like Social Security and Medicare? A strange silence on this topic, which I am unable to interpret.
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executive summary: Paul Ryan has no cohones
He probably gives his kids unlimited candy everyday to avoid being the mean parent (in other words, he is not much of a parent at all — just appeases everyone and gets walked on like a world class wimp).
Recession is when you lose your job. Recovery is when Pelosi and Ryan go to jail
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Because the goal of all government, is to take from those who produce something, and hand it to those who produce nothing. Which is what “investment income” is fashionable Newspeak for.
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Reuters headline: “Fed, wary of inflation, could lean against Trump tax cut.” The story line is: Trump would unleash economic growth, which the Federal Reserve banking cartel calls bad for the economy, thereby forcing the Fed to accelerate interest rate increases.
http://www.reuters.com/article/us-usa-fed-trump-idUSKBN17S2X1
The Trump administration says hundreds of billions of dollars fed into the economy via deep cuts in business taxes and more generous exemptions for individuals will unleash a wave of investment and make the U.S. economy more competitive than ever. But the plan, if approved in the form Trump officials outlined on Wednesday, could add inflationary fuel to an economy already running near full capacity, a risk Federal Reserve officials have been warning about since Trump got elected…Fed officials will need to start debating if they can maintain a measured pace of rate hikes or they might need to move faster, say analysts and economists who follow the U.S. central bank…Trump has said he hopes low rates will continue, a potential source of friction with the Fed if officials do decide they need to move faster because of his policies…
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Here’s the only detail anyone needs to know about tax cuts, and I say this as someone who voted for Trump and still supports the least dirty shirt in the laundry:
Unless and until the cowardly losers in Washington implement spending cuts, the country cannot afford tax cuts.
Government is going to get smaller, or government is going to get irrelevant. They can’t enforce critical laws as it is, they are having more and more trouble projecting power abroad, they can’t manipulate the economy as they did for awhile, and they can’t even get everyone in Washington DC marching in the same direction.
Its stupid to think anything positive can happen unless and until Obamacare gets repealed, and that spineless Paul Ryan doesn’t have the cohones to make leadership choices.
Obamacare will get repealed sooner or later, probably after Ryan gets removed. Federal headcount will get slashed. Debt levels will stagnate, while the real economy (not finance) grows and inflation causes partial defaults.
After eight years of Trump basically treading water on official statistics, the true economy will hopefully have caught up with reported GDP, inflation will have partially defaulted on the national debt, obamacare will be repealed, federal headcount will have been cut by attrition and partisan bickering….
and hopefully after that the US economy can get going again. In the meantime, the low quality kabuki theater that is Washington DC is just a way to get your blood pressure up.
Scream all you want, but the US will go back to acting like adults (much smaller government that lives within its means) or we will go the way of Greece (lame, ineffective, bankrupt government that gets replaced every two years)
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We will go the way of Greece. Because the only realistic adult alternative, is to go the way of Somalia. And the children have all been told that Somalia is a real scary hobgoblin that they must pay banksters and ambulance chasers to protect them from.
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Greece doesn’t pay social security, medicare, pensions (public or private) and the welfare they pay isn’t enough to buy groceries. Their government is just plain impotent.
The Greek people work pretty hard, even if they don’t report it and (understandably) don’t waste the fruits of their labor on paying taxes.
Can the same be said for Obama’s free sh!t army in the USA? Who is going to support millennials playing video games, calling uber cars, and attending stupid protests? Their parents will be taxed into nothingness, and even if the millennials start working in 10-15 years, what skills do they have?
The college kid on my street (the one I described sitting inside while his 85yr old grandfather shoveled snow for 3 hours) is going to work like a Greek citizen? Dream on.
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I work with and surround myself with plenty of extremely motivated and hardworking millennials, so they’re not all that bad.
I do recognize many are unmotivated. But at least a good share of the lack of motivation, stems from the fact that there is little to nothing to be motivated about, unless you are lucky enough to be in the “Silicon Valley Startup” demographic (Ivy degree, parents who can support you “following your dream” without having to worry about San Francisco rent payments until you have a “liquidity event.”)
The parents and grandparents who are shoveling snow, likely own the house they are shoveling in front of. And they bought it at not too far above it’s cost of physical construction. Whereas for young people today, their parents and grandparents have also championed and put in place laws, regulations and inflationary Fed policies, that ensures a house anywhere close to where “the good jobs” are, is at least an order of magnitude more expensive than the cost of building it. Hence unobtainable anyway, work or not, for all but the above mentioned Ivy set, or the occasional rock star and ball player.
And in addition, the same inflationary policies and laws and regulations aimed at letting the older generations (who happened to get in on the asset gravy train before asset pumping became the only game in town) rent seek with abandon, have made it too expensive to produce anything in the US. So there aren’t much in the way of “good jobs” to aim for, even if the kids wanted one.
Hence, it’s perfectly rational for many young people to play video games and wait for their parents to croak. Upon which they’ll inherit pumped up houses, stocks and bonds “worth” several multiples of what they could realistically earn in a lifetime of working at the only jobs the current “economy” have on offer for them anyway.
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Doesn’t feel like Trump put together a tax plan so much as a talking points memo. Lots of details let out. The articles reporting on it seem to contain more words than Trump’s actual proposal. Kept hearing over the years that corporate tax rates should come down while deductions go away but somehow that latter part is now missing. And while the AMT is hated by just about everyone it is the sole reason Trump seems to be paying any taxes.
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Getting rid of interest deductions would be great, no reason debt should be subsidised, whilst interest rates are low is the only time this can be removed. Be astounded if this actually happens though.
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