This editorial will be longer than President Donald Trump’s current tax plan. We’ve added more words and more information than it seems the White House did. We also raise questions the one-page plan doesn’t even begin to answer. And, unlike the president, we won’t make grand promises we can’t keep.
So far, Trump’s tax overhaul, unveiled Wednesday, is flimsy and certainly incomplete. But from what we can tell, the plan seems to be a windfall for the wealthiest Americans, with little evidence that it delivers on Trump’s campaign promises. It could particularly hurt regions like Long Island, where taxpayers depend on itemized deductions to lower their tax burdens. And it could balloon the federal deficit, leaving generations with a hole that’ll be difficult to escape.
The proposal does take the right approach in attempting to simplify the barnacled process. It would, for instance, reduce the number of income tax brackets from seven to three. But we don’t know the income levels for those brackets, so we have no idea how that would affect individual taxpayers. Wealthy taxpayers would benefit from the elimination of the estate tax and the alternative minimum tax, as well as from reductions in the corporate tax rate to 15 percent, a rate that would also apply to income from partnerships, hedge funds and other “pass-through” arrangements. White House officials claim they would find a way to prevent lawyers, consultants and other high-income earners who now pay at a higher individual rate (up to 39.6 percent) from sliding into the 15 percent category. But the door seems to be wide open for those at the top to benefit most. It widens even further when we add the GOP’s repeal of a tax that funds Medicare tucked into the proposed Obamacare repeal.
In a potentially devastating move for highly taxed regions like Long Island, the president’s plan would get rid of key itemized deductions, including those for state and local taxes, and medical and home office expenses. The mortgage interest and charitable contributions deductions would stay, but that wouldn’t matter if many of the 600,000 Long Islanders who itemize could no longer do so. The standard deduction would double but still their taxes could rise, and the value of their homes sink.
And despite pledges to the contrary, there’s no evidence that the massive tax cuts would lead to significant job creation or economic growth, never mind the kind that would cover the revenue loss — up to $7 trillion over the next 10 years. The concept of cutting taxes to spur growth, in the hopes that the growth would fill the revenue gap, isn’t new. It dates back to economist Arthur Laffer’s infamous curve of the 1970s and ’80s, and, later, to the concept President George H.W. Bush called “voodoo economics.” We’ve been down this road under Presidents Ronald Reagan and George W. Bush. Both times, the concept failed, and deficits grew.
And while it’s not by itself a reason to dismiss the overhaul, yes, Trump’s plan would certainly benefit Trump, his family and their companies. We don’t know how much because the president won’t release his tax returns. We’re told he has no intention of doing so.
Congress should insist on it — especially before approving any tax overhaul. — The editorial board