Donald Trump’s tax plan could cost $1.5 trillion over the next decade more than he has projected and skew even more to the wealthy, according to a nonpartisan analysis released Monday.
Trump released his tax plan last week – his third attempt to sketch out a workable proposal – telling voters to check his math. “It works,” Trump promised, estimating the cost at $4.4 trillion and claiming that record-setting economic growth would prevent the cuts from increasing the deficit.
Trump was relying on estimates from the Tax Foundation, which supports lower taxes, when he pitched the plan to the public. But he left unclear a key detail regarding businesses that are classified as “pass-throughs.” Mostly small businesses – but occasionally very large ones – incorporate so their profits are taxed as personal income, rather than business proceeds.
At issue is whether Trump’s plan for a flat 15 percent corporate tax rate applies to so-called pass-throughs. The Tax Foundation said his campaign indicated to them those rates would not apply. But the National Federation for Independent Business told the New York Times the GOP’s nominee’s team assured them pass-throughs would get the lower rate.
The Trump campaign has not commented, forcing the Tax Foundation to issue two estimates. Should Trump allow pass-throughs to be taxed at 15 percent – instead of the 33 percent that many otherwise would be assessed – his plan would cost $5.9 trillion over 10 years, the analysis found. That’s $1.5 trillion more than Trump predicts.
Trump would condense the income tax structure into three brackets, establish the flat 15 percent business tax and cap deductions at $200,000 per household.
The foundation estimates that the cuts would trigger growth that would reduce its actual cost to $2.6 trillion – or $3.9 trillion with the pass-through provision. They’d create up to 2 million more jobs but also disproportionately benefit the wealthy, who could receive 10 percent more income, which would leap to 16 percent under the pass-through.
This is Trump’s third attempt to sketch out a workable tax plan. His initial proposal during the Republican primary would have created an $11 trillion deficit and was received with widespread derision even among many Republican tax experts. In August he took that plan off the table but said he wasn’t ready to provide enough details to estimate the cost of his new plan.