Donald Trump's Tax Plan

I. Basics of the Trump Tax Plan
*Tax rates would be 0, 10, 20 and 25 percent.
*The alternative minimum tax eliminated.
*Th marriage penalty eliminated.
*"Carried interest loophole" eliminated.
*40 percent tax on an inheritance over $5.4 million eliminated.
*Businesses and corporations would get a tax rate of 15 percent.
*20 percent tax rate for dividends and capital gains held over a year retained.
*Individuals with incomes of $25,000 or less and families with incomes of $50,000 or less would pay no federal income tax.
*Home mortgage interest and charitable giving deductions are retained but what other deductions and loopholes Trump plans to eliminate are not specified.

II. Revenue Loss
The pro-business Tax Foundation has concluded that the Trump plan would cut taxes by nearly $12 trillion over a decade on a so-called "static" basis, meaning not taking into effect how the tax cuts would increase incentives to work and invest. Conservatively, the Tax Foundation estimates that the Trump plan would cut tax revenue by $10 trillion over ten years. Steve Gill, a tax and accounting professor at San Diego University, says that those earning more than $200,000 a year would pay $400 to $500 billion less in taxes annually.

Donald Trump contends that robust economic growth will make up for the revenue lost through his tax cuts. Ryan Ellis of Americans for Tax Reform answers that even the most optimistic estimates of economic growth won't make up the revenue loss from the tax cuts.

When Mitt Romney ran for president in 2010, he also contended that economic growth and elimination of tax breaks would make up for the revenue  loss from his proposed tax cuts. The Tax Policy Center (TPC)  then responded that even if Romney eliminated all tax breaks for the wealthy, it would not eliminate the revenue loss from his tax cuts. The TPC said the alternative would necessitate the imposition of much higher taxes on the middle class.

III. Other Effects of the Trump Tax Cuts
Nearly 75 million tax filers would pay no federal income tax under the Trump plan, compared to the 67.3 million tax filers (41.4 percent of all tax filers) that the TPC found paid no federal income tax in 2014. The problem with this approach is that it negates the "we're all in this together" spirit and builds resentment in those who do pay federal income tax. Those who would have otherwise paid income taxes would gain an average income increase of $!,000, hardly sufficient to make a significant difference in the standard of living.

The Tax Foundation has illustrated how the Trump tax cuts would increase after-tax income based on economic deciles: a 3% increase for those in the 30 to 40% decile; 8.9% for those in the 80 to 90 % decile; and 14.6% increase for those in the top decile.

As far as the estate inheritance is concerned, easing of the inheritance tax beginning with the two major tax George W. Bush tax cuts resulted in fewer than 5,000 estate tax returns being filed in 2013, compared to 177,000 such filings in 1977. I remember when I was part of a group opposed to a proposal to raise the threshold monetary level of those subject to the estate tax. We couldn't find a single Illinois family farm that would be subject to the tax if the proposal was enacted.

What should be kept firmly in mind in evaluating the Trump tax cut proposal is that, at best, he is only talking in terms of no decrease in revenue to the national government. Given that there is a strong consensus among economists that unless there are huge cuts in national government spending, which are highly unlikely to occur, there will a major run-up in the deficit in the next decade and beyond. Economic growth and further elimination of tax breaks to the wealthy will not be sufficient to balance out the revenue loss already measured in Trump's taxation plan. The retention of the home mortgage and charitable giving deductions, alone, will mean an annual loss of $120 billion in revenue.