Mnuchin promises Trump’s tax cuts will be biggest ever
NEW YORK — The Trump administration is finally outlining its proposal for tax reform, which leans heavily on tax cuts.
It will be “the biggest tax cut and largest tax reform in history of this country,” Treasury Secretary Steven Mnuchin promised Wednesday morning in an interview with The Hill.
In a bid to spur economic growth and make businesses more competitive internationally, President Trump wants to slash the top tax rate for all businesses to 15%, far below top rates today.
But the administration’s outline for tax reform — which echoes much of what Trump proposed during the campaign — still leaves many questions unanswered and faces an uncertain future, even in the Republican-controlled Congress.
One key question: How will Trump offset the cost of all those tax cuts? While more details are expected Wednesday afternoon, that answer is not likely to be among them.
Based on what Mnuchin said Wednesday and what White House officials have told CNN, here’s what we know so far.
Much lower business rates: Trump still wants to slash the top tax rate for all businesses to 15%, as he proposed during the campaign.
That’s well below the 35% that corporations are subject to today, and the 39.6% for so-called pass-through businesses. Those run the gamut from mom-and-pop shops to law firms and hedge funds. In a pass-through business, the owners report profits on their personal tax returns.
One-time tax on overseas profits: The president may again call for a low, one-time tax on the $2.6 trillion of profits that were earned overseas by U.S. multinational corporations and were technically never brought back to the United States.
The Tax Policy Center estimated last fall that such a provision would raise $148 billion over a decade, money that could be used to offset the cost of some of Trump’s desired tax cuts.
No border adjustment tax as proposed: Trump is not expected to back the controversial new border adjustment tax as proposed by House Republicans.
“We don’t think it works in its current form, and we will have discussions with [House tax writers] about revisions,” Mnuchin said.
A border adjustment tax would fundamentally alter how imports and exports are taxed. Under the House plan, companies could no longer deduct the cost of their imported goods, and sales of their exports would no longer be subject to U.S. tax.
Such a provision could raise more than $1 trillion over a decade, which the House GOP was counting on to help offset the cost of their proposed rate cuts.
Trump has been a proponent of a selective import tax — and has suggested he might favor a “reciprocal” tax. But he has yet to explain what that means.
Lower individual income tax rates: The White House still hasn’t settled on which rates they’ll propose.
As a candidate, Trump proposed to reduce the number of tax brackets from seven to three for individuals. Initially, he called for those rates to be 10% 20% and 25%. That’s well below today’s top rates of of 28%, 33% and 39.6%.
Then he amended his plan, calling for somewhat higher rates to match what House Republicans have been calling for: 12%, 25% and 33%.
Mnuchin suggested as a result of Trump’s proposals many average Americans won’t end up owing any federal income tax at all.
Tax break for child care costs: Late in the campaign, Trump called for two tax breaks to help ease families’ child care costs. One would let parents could deduct the average cost of child care in their state, based on their child’s age. The other would give a tax break to anyone who sets aside up to $2,000 a year to cover costs associated with child care and elder care.
The contributions would be tax deductible, then grow tax free.
Tax and child care policy experts have said both breaks, as proposed, would disproportionately benefit wealthier families. And in the case of millions of low- and middle-income families, the breaks would raise their tax burden when combined with Trump’s other proposals to eliminate head of household status, repeal personal exemptions and raise the lowest income tax rate to 12% from 10% currently.
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