President Trump’s economic advisers are considering whether he should make the promise of a middle-class tax cut a central element of his reelection campaign, according to various reports.
The internal deliberations have focused on a proposal to lower the middle-class tax rate to 15%, with the new rate likely covering those who earn between $30,000 and $100,000. Some advisers have embraced the idea “as a simple way of selling Republicans’ economic agenda as not merely beneficial to the rich,” The Washington Post’s Jeff Stein reported Tuesday.
The GOP’s 2017 tax cut package proved to be unpopular and was widely criticized as disproportionately helping corporations and the rich. Many Americans who had gotten tax cuts said they hadn’t noticed any change and did not believe they had benefited from the new law.
But, but, but: The current discussions are still at a preliminary stage, and it’s not yet clear where they might lead. Trump had floated the idea of a 10% middle-class tax cut before the 2018 midterm elections, but that talk did not result in a concrete proposal after the election.
Larry Kudlow, director of the White House National Economic Council, is reportedly leading the latest White House effort. He told CNBC Tuesday that Trump had asked him to “pursue something called Tax Cuts 2.0,” but that it is “way too soon” to get into specific details like a 15% rate. “I don’t know, sounds like a pretty good idea to me,” Kudlow said. “But I’ve got to consult with a lot of people, and I’ve got to get the president’s sign-off before anything comes out ... Those conclusions will not come for many months.”
The costs: The 2017 GOP tax cuts are projected to add $1.9 trillion to the deficit over 10 years, and any new cuts would likely add hundreds of billions of dollars to the deficit unless they were accompanied by major spending cuts. “I love tax relief, but this is getting ridiculous,” conservative budget and tax expert Brian Riedl of the Manhattan Institute tweeted. “Deficits are already headed towards $2 trillion within a decade. Unless Republicans are actually willing to cut spending accordingly, no additional tax cuts will prove sustainable. Pick a level of spending, and then pay for it.”
Another big tax cut for the rich? Cutting marginal rates would benefit those in higher tax brackets as well, but The Post’s Jeff Stein reported that other options have also been discussed, including “a payroll tax cut, revamping how capital gains are taxed, exempting savings from taxes, and reducing the number of tax brackets from seven to somewhere around three or four, according to Stephen Moore, a conservative tax expert at the Heritage Foundation who has worked with the White House on tax policy.”
Moore’s capital gains proposal would allow investors to avoid paying taxes on their stock market gains if they reinvested the proceeds in shares of other companies. That would represent a massive tax break for wealthy investors.