President Donald Trump is newly pitching a massive federal tax code overhaul as a middle-class tax cut that would level the playing field for American business, but Democrats are pushing back against what Sen. Elizabeth Warren described as “warmed-over” Republican trickle down economics.
Trump and Republican leaders in Congress are trying to turn the page from their failed repeal of Obamacare by charging into a debate over a tax system that the White House said was “rigged against hardworking Americans.”
Trump called the tax reform framework, which included a slashing of the corporate tax rate to 20 percent, “the largest tax cut, essentially, in the history of our country.”
“We want tax reform that is pro-growth, pro-jobs, pro-worker, pro-family, and, yes, tax reform that is pro-American,” Trump said at a rally in Indiana. “It’s time to take care of our people, to rebuild our nation, and to fight for our great American workers.”
The introduction of Trump’s plan will likely sent Congress into a debate this fall over tax policy while in Massachusetts policy analysts are mulling over the impacts of reductions in the sales tax rate and a new surtax on household income above $1 million, both proposals that may appear on the 2018 ballot.
The Trump plan calls for reducing the number of tax brackets from seven to three – 12 percent, 25 percent, and 35 percent. While the highest income earners currently pay 39.6 percent on income, the GOP framework allows for a possible fourth bracket to ensure the wealthiest American don’t pay a smaller share of their income than they do today.
The increase in the lowest tax bracket from 10 percent would also be offset, according to the administration, by a doubling of the standard deductions to $12,000 for an individual and $24,000 for a married couple, and an increase in the child tax credit.
The framework did not specify the income ranges that would fit into each tax bracket, leaving major questions about how the plan would impact Massachusetts families, according to one accountant.
Mark Nichols, a principal with Landmark Financial Services in Andover, said an increase in the standard deduction combined with the elimination of other personal exemptions and deductions turn out to be offsets for many taxpayers.
“It sounds good, but it may not really be a huge windfall,” he said.
The businesses tax cuts could lead to higher taxable profits, payrolls and investments that could be a boon to the Massachusetts economy, he said, as long as those increased profits get reinvested in workers and the broader economy.
Trump has had difficulty over his first months in office shepherding major proposals through a closely split Congress, but his administration indicated out of the gate that it had developed the tax reform framework in cooperation with the House Ways and Means and Senate Finance committees.
Still, without a plan to pay for the tax cuts and many of the details in the proposal left to Congress to sort out, tax reform will not be an easy sell.
“The ‘new’ Republican tax plan is the same warmed-over, trickle-down plan they’ve been pushing for decades. It delivers massive tax cuts to millionaires and giant corporations and kicks working families to the curb,” U.S. Sen. Elizabeth Warren said.
Warren singled out the elimination of the state and local tax deduction and the proposed repeal of the estate tax as areas of concern, as well as the proposal’s potential to “explode the deficit” or lead to calls from Republicans for the cutting of Medicaid, Medicare and research funding.
U.S. Rep. Richard Neal, a Springfield Democrat and the ranking minority member of the Ways and Means Committee, also said the plan would benefit the rich, and criticized the lack of key details in the nine-page framework released by the White House.
“This tax plan would give big tax cuts to the wealthiest Americans, helping the rich get richer while leaving behind working families and middle-class Americans. Not only that, their plan would also explode our nation’s deficit by believing that tax cuts pay for themselves – something that respected economists on both sides of the aisle know is simply not true or borne out by any facts,” Neal said.