After losing horribly on health care reform, Trump is ready to try again – this time on a major overhaul of the United States tax code. The complexity of the tax code and the repercussions if the reforms fail to provide sufficient income to fund government programs have many citizens on edge.
Trump recently met with Treasury Secretary Steven Mnuchin, National Economic Council Director Gary Cohn, and Steve Bannon, Jared Kushner and staffers from both agencies discussing various policy trade-offs and laying the early foundation to begin structuring a plan. Information is limited due to White House efforts to keep details under wraps, even from House Speaker Paul Ryan, and also due to their refusal to have anyone outside of this group work on the plan.
Sean Spicer did briefly comment on the secrecy of Trump’s tax plan by stating:
The president will put out principles, I’m sure, in terms of what his goals are and drive this as the process moves forward.
Regardless of the plan, this will be Trump’s third tax blueprint in less than a year, although campaign advisers and transition staff members have each developed separate blueprints, however, it is unknown if their blueprints will be combined with Trump’s third attempt.
Stephen Moore, a senior economist at the conservative Heritage Foundation, criticized the Treasury for wanting to rewrite the tax plan when “Trump already has a great tax plan he ran on in the campaign.” There’s a possibility, though, that Mr. Moore was feeling defensive because he assisted in drafting the Trump campaign’s tax plan.
Certain tax ideas are causing many to feel uneasy with keeping current rates on capital gains, and also excluding Paul Ryan’s border adjustment tax. Without the border adjustment tax–which is a source of a lot of the revenue in Ryan’s tax reform plan–tax offsets get a lot harder and could create problems for everyday taxpayers down the road.
For those who are confused about what the border adjustment tax would be, Investopedia explains it this way:
The border adjustment tax (BAT) levies a tax depending on where a good is consumed rather than where it is produced. For example, if a corporation ship tires to Mexico where they will be used to make cars, the profit the tire company makes on the tires it exports isn’t taxed. However, if an American car company purchases tires from Mexico for use in cars made in America, the money it makes on the cars (including the tires) sold in the U.S. is taxed. In addition, the company cannot deduct the cost of the imported tires as a business expense. The idea of the tax was developed by Alan J. Auerbach in two papers from 1997 and 2010.
Moore and Larry Kudlow, both of whom helped develop Trump’s original tax plan on the campaign trail, call the border adjustment tax a poison pill. Kudlow did say that the focus of this reform should be on reducing business taxes, cutting corporate rates, taxing revenue American companies earn abroad, and allowing for the immediate expensing of business investment. Bannon is fond of this last item because he believes it will drive growth in the manufacturing sector. Trump’s plan may also include a child care tax credit, inspired by Ivanka, to ease the burden of the tax changes on families.
There are still potentially big disagreements within the White House ranks on the details that would affect raising revenue and the deficit. Maybe we should tweet him ideas?
Featured image by Mark Wilson via Getty Images