The Next Clash Emerges: Trump-Ryan Deeply Divided Over Tax 'Cuts'

After failing to achieve Republican agreement over healthcare reform, The Washington Post reports that while President Trump and House Speaker Paul D. Ryan both want to rewrite the tax code, they are deeply divided over how much tax relief to give the middle class.


As WaPo details, Trump proposed a plan that would have reduced taxes drastically, especially for the wealthy but also for the poor and working class. Meanwhile, Ryan and his colleagues put together a plan that was equally generous to the rich but that would give poor and middle-class taxpayers less of a break. The speaker's plan would even have increased taxes on some in the upper middle class. The richest 0.1 percent of households would receive similar benefits from both politicians: an average of $1.4 million per household a year under Ryan's plan and $1.5 million annually under Trump's plan.

After a decade, 99.6 percent of the tax relief Ryan proposed would have accrued to the wealthiest 1 percent of the country. In Trump's plan, 50.8 percent of the relief would have gone to that group, according to analyses by the nonpartisan Tax Policy Center. Most notably given the divisions within the Republican Party (i.e. fiscal conservatives rejection of the healthcare reform bill), Trump's plan would be extremely costly for the government, reflecting his conservative populist comments in the past that suggest he would be willing to put the federal government deeper into debt to fund breaks for the middle class.

Ryan's plan would instead simplify and streamline the tax code in accordance with conservative orthodoxy, eliminating the goodies for households with modest incomes that Trump would preserve or expand.

It's not all bad though as the two tax plans have important features in common, as WaPo's Max Ehrenfreund reports,

In terms of taxes on the rich, both plans would reduce the marginal rate paid by the wealthiest taxpayers on individual income from 39.6 percent to 33 percent.

 

The two plans would repeal some of the taxes that Obamacare imposed on the rich, and both plans also repeal the estate tax, which rich families pay when one of their members dies. Repealing the tax would return $300 billion or so to those families over a decade, according to the center, depending on the details of the plan.

 

Meanwhile, both plans would increase the amount that many families can earn without paying taxes.

The biggest reason for the discrepancy in the effects of the plans on the middle class is how Ryan's proposal would affect imports and exports.

The plan includes a complex and controversial provision known as a "border adjustment", which some economists think would increase prices for goods and services imported from overseas.

 

Eric Toder, an economist at the Tax Policy Center, said the group's initial analysis of this aspect of the plan treated it as a kind of tax on households' purchases, but many experts believe that Ryan's proposal would not have that effect over the long term.

 

Ryan's plan would be better for the middle class on that more optimistic assumption. “When we do it that way, there actually is a bit of a cut for the middle class,” Toder said.

So get ready America, it will be hard for Trump to temper his on-again, off-again support for Speaker Ryan if this division grows - and ironically, Trump may find more support from the other side of the aisle for his 'middle-class tax cuts' as the GOP splinters further.