WASHINGTON ― Donald Trump touted a retooled economic plan on Thursday, promising to provide middle-class tax cuts and eliminate perks for the rich. The actual terms of the plan, however, indicate an approach that remains tilted heavily in favor of the wealthy.
Trump would slash the federal income tax rate for the richest Americans from the current level of 39.6 percent to 33 percent, and reduce the tax rate on the largest corporations from 35 percent to 15 percent. His plan would wholly repeal the federal inheritance tax, a levy that only applies to families that transmit several million dollars to heirs. Eliminating the inheritance tax on the rich would cost the U.S. Treasury about $269 billion over 10 years.
Small businesses would also benefit from Trump’s 15 percent cap on corporate taxes. But using this strategy to help small firms allows the ultra-rich to benefit, too. Many conventional mom-and-pop operations file their taxes as S-corporations, allowing their profits to be taxed as individual income. This arrangement prevents the business owner from being taxed twice on his or her earnings ― once at the corporate rate and then again as these profits flow to the owner as income.
But many wealthy professionals use this system, too. The used book store on Main Street may file its taxes as an S-corporation, but so do plenty of well-to-do doctors, lawyers, authors, lobbyists and hedge fund managers. Trump’s 15 percent cap on this business money is a perk for wealthy individuals currently pay a 39.6 percent rate on ordinary income that flows through these channels.
This element of Trump’s plan undercuts the GOP nominee’s boast that he will eliminate the carried interest loophole, which allows hedge fund managers to pay a 23.8 percent rate on their income, instead of the 39.6 percent rate that the wealthiest individuals would otherwise be charged. Trump would indeed eliminate the carried interest perk, but he’d replace it with a plan that would allow fund managers to bring down their tax rate all the way to 15 percent.
Independent experts have yet to weigh in on the implications of Trump’s tax plan. Analyses of a previous Trump tax proposal outlined during the GOP primary found that this platform would have cost the Treasury between $10 trillion and $12 trillion, increasing the national debt by 75 percent or more.
Overall, Trump said his tax cuts would cost about $4.4 trillion, over 10 years. To raise revenues, Trump said he would levy a one-time 10 percent charge on corporate cash currently being held offshore. U.S. corporations are keeping about $2.1 trillion abroad, giving this measure about $210 billion in revenue. Trump also proposed slashing government spending by $1 trillion, without trimming the defense budget, Social Security or Medicare, a move that would likely require attacking programs that benefit the poor and middle class. Trump also said that deregulating energy markets would raise additional funds for the federal government.
Editor’s note: Donald Trump regularly incites political violence and is a serial liar, rampant xenophobe, racist, misogynist and birther who has repeatedly pledged to ban all Muslims — 1.6 billion members of an entire religion — from entering the U.S.
Correction: This article previously misstated the top rate in Trump’s plan as 25 percent. This article has also been updated to provide additional information on Trump’s proposed spending cuts and revenues.