Two days after the nonpartisan Tax Policy Center announced that the White House’s tax reform plan would raise taxes on about 12% of taxpayers, Treasury Secretary Steven Mnuchin took to the Sunday talk shows to defend the Trump tax plan, which was unveiled Wednesday in a nine-page document.
And in characteristic Trump Administration fashion, In an appearance on “This Week” with George Stephanopoulos, Mnuchin repeatedly countered questions about the plan's impact on Trump's tax rate, or if it would raise taxes on middle-class Americans to fund large cuts for the rich, by noting that the details of the legislation had not yet been worked out, before prommising that all of Stephanopoulos's complaints would be rectified when the bill is written in committee.
During the interview, Stephanopoulos pressed Mnuchin about research showing that 80% of the financial benefits from the plan would accrue to the top 1%, and other details of the TPC’s analysis – including claims that Trump and his family would benefit financially from the repeal of the estate tax, the repeal of the AMT, and cuts to the pass-through rate, among other provisions.
Earlier in the week, NEC Chief Gary Cohn raised hackles among Trump critics by saying he couldn't guarantee that the bill wouldn't raise taxes on some members of the middle class.
With President Trump unwilling to release his tax returns, how will the American people ever know whether or not Trump benefits from his own tax plan? Stephanopoulos asked, before bringing up the president’s promise during a speech introducing the plan in Indiana earlier this week that he wouldn’t benefit from the plan.
Mnuchin responded that he was certain the president would provide whatever information necessary to prove that he wouldn’t benefit.
“It’s very important that we have guardrails around those rules. This isn’t about creating a tax cut for the rich. We’re going to make sure that that’s not a way for the rich to pay lower taxes than they should, whether it’s the president or anyone else.”
When pressed about the plan’s lowering of the top tax brackets, Mnuchin responded that these changes would be more than offset by eliminating deductions.
“Changes in the top bracket are offset with elimination of almost every type of deduction other than charitable giving and the mortgage interest deduction. This has impacted different people in different states but again we will go through all the details as we go through the congressional process in the House and the Senate. Like I said, this is about creating jobs. A huge percentage of the businesses in the country are pass-throughs.”
When pressed again about how Trump would verify that he wouldn’t benefit, Mnuchin again insisted that Trump would provide total transparency.
“The American public will be comfortable with the information they have. We’re going to make sure there’s the proper rules and full transparency as we go through the legislative process to make sure that rich people can’t benefit from it.”
Moving on, Stephanopoulos brought up the TPC’s analysis showing that 60% of Americans making $150,000 and $300,000 would pay higher taxes thanks to provisions like the repeal of the state and local tax deductions. About 3 million people in New York will see taxes rise because of the elimination of the SALT deduction, Stephanopoulos said.
Mnuchin said that he’s sympathetic, but at the same time, the plan eliminates what he characterized as federal subsidies for the states with high property values – a creative interpretation of the SALT deduction.
“I’m sympathetic to people in New York and California…but I don’t think it’s fair that other states are subsidizing New Yorkers and California.
We’re trying to create certain adjustments so the middle class in New York and California don’t get hit hard by this, but there are issues, like you’ve said, when we change a system, when we eliminate the subsidies in certain states, we face certain issues.”
Mnuchin then insisted that it’s the administration’s goal to lower taxes on everybody – an outcome that would presumably rule out the notion of making the cuts even close to deficit neutral.
“No, it is our objective that the entire middle class does get a tax cut but that’s something we’re working on the details.”
That’s our objective. That’s what we’re working toward.”
But would the president veto a bill if it has some middle-class tax increases in it?
“The president is setting any criteria up front about what he is going to veto or not going to veto. What he is doing is working with Congress…it’s been over 30 years since we’ve had tax reform. We have a broken system…we’ve got to make a system that works for all Americans and all American businesses.”
We’ve already seen Sen. Bob Corker say he’s not going to vote for any tax bill that widens the deficit, Stephanopoulos noted. How will the administration’s reform bill win over deficit hawks like Corker?
Mnuchin repeated the administration’s line that a combination of eliminating deductions and an expected acceleration in GDP growth would help close the gap, eventually leading to smaller deficits.
“I’ve had the opportunity to meet with Senator Corker and others and walk them through the math. Here’s the math, George so you understand it. Our plan on a static basis will increase the deficit by a trillion and a half dollars. That will be offset by a half a trillion dollars difference between what we call the baseline in policy which is rolled over, so that’s addressed down to a trillion, and we believe there will be two trillion dollars of additional growth. So, under our plan we believe this will cut the deficit by a trillion dollars and that’s what we’re forecasting. And that’s with a conservative 2.9% annual GDP increase.”
Based on what we already know about the proposed Trump tax reform, which can be summarized as follows:
- collapse the seven individual income tax rates to three (12, 25, and 35 percent),
- increase the standard deduction,
- eliminate personal exemptions,
- increase the child tax credit,
- eliminate most itemized deductions,
- repeal the individual and corporate alternative minimum taxes,
- repeal the estate tax,
- reduce the corporate tax rate from 35 to 20 percent, tax pass-through business income at a top rate of 25 percent,
- allow businesses to fully expense investment in equipment and machinery for at least five years,
- adopt a territorial tax system that would exempt the foreign earnings of US corporations from US tax
The TPC’s analysis showed the Trump plan will cost $2.4 trillion over the first decade and $3.2 trillion over the second decade, on a static basis.
While many Americans will benefit, the biggest gains will go to the 1%, whose after-tax income would increase by over 8%.
Fast forward to 2027, when the overall average tax cut would be smaller than in 2018, increasing after-tax incomes 1.7 percent. Taxpayer groups in the bottom 80 percent of the income distribution—those making less than about $150,000—would receive average tax cuts of 0.5% or less of after-tax income. However, taxpayers making between about $150,000 and $300,000 would on average pay about $800 more in taxes than under current law. Meanwhile, about 80% of the total benefit would accrue to taxpayers in the top 1 percent, whose after-tax income would increase 8.7 percent.
And by 2027, taxes would rise for roughly one-quarter of taxpayers, including nearly 30% of those with incomes between about $50,000 and $150,000 and 60 percent of those making between about $150,000 and $300,000.
But like Mnuchin has insisted, we’re sure the administration will work all of this out in committee.