Quote:Trump misleadingly claims that U.S. firms face the highest taxes in the world, and therefore his plan slashes the corporate income tax rate from 35 to 15 percent. Since capital income is heavily concentrated at the very top of the income distribution, and the corporate income tax largely falls on the owners of capital, this is a steeply regressive tax cut.

But Trump would go one step further, creating an enormous tax loophole for the rich by applying his 15 percent corporate rate to “pass-through” entities as well. Pass-through entities are businesses whose income are not taxed at the corporate level, but rather passed through entirely to the businesses’ owners and then taxed at the owners’ individual income-tax levels. High-income households can easily avoid paying their full income tax bill by reclassifying their income as pass-through income. This loophole allows Trump to claim that he is closing the carried interest loophole, while actually lowering the rate that hedge fund managers would pay from 23.8 percent to 15 percent.

Quote:What the GOP candidate outlined in his big economic speech in Detroit on Monday relies entirely on an outdated theory (trickle-down economics), a debunked concept (that free trade is bad) and out-and-out legerdemain that attempts to dress up tax cuts for the rich as a boon to the middle class. It was an exercise in magical thinking that exposed almost all Trump’s promises on the stump over the past year as baseless. And it took place in a city of Detroit that exists only in Trump’s imagination.

• Trump proposes to abolish the estate tax entirely. Bush and congressional Republicans tried hard to do this, and got close, but didn’t quite make it. Trump, like his predecessors, tries to hide the fact that only the very rich would benefit because the current estate exemptions are so high: $10.9 million for the estate of a married couple (and half that for an individual). In the most recent year available, only 4,700 estates in the entire country, out of 6 million deaths, required the reporting of some estate tax liability. Trump repeated the old fairy tale of farms or small businesses that have to be sold by heirs to pay the estate tax; but Republicans after all these years are still unable to come up with specific instances of this actually happening.
  
• He proposes to cut corporate income taxes very sharply, to 15%. It is true that the US corporate income tax rate is among the highest in the world, at 35%, and that this probably contributes to companies keeping profits overseas, rather than repatriating them to the US. But as most tax policy experts will tell you, a reduction in the overall rate should be accompanied by base-broadening. In particular, we should abolish corporate tax deductions such as those designed to encourage corporate debt and oil drilling. We could thereby reduce harmful distortions in the economy while simultaneously making up revenue.
  
• Trump’s proposals to cut personal income taxes have now changed a bit. Before the primaries, his fiscal proposals included cutting the top marginal income tax rate from 39.6 %, the current level, to 25%. Independent analysts pointed out that his tax policies would lose about $10 trillion in revenue over the first decade, a mind-bogglingly big number.  They would rapidly drive to record levels the national debt as a share of GDP, which has been coming down over the last five years.  His most recent proposal is to cut the marginal tax rate for high earners by about half as much, to 33%.
  
• A new proposal, apparently added at the urging of daughter Ivanka Trump: Allow tax deductions for the entirety of average child care costs. Any such deductions benefit only those in high enough tax brackets to itemize deductions (like mortgage interest), which is mostly those who earn more than $75,000. That is well above US median household income of $54,462 in 2015.
  

• Capacity utilization is at 75%
  
• Companies enjoy record profitability and record cash balances, do not lack funds to invest
  
• Interest rates are at record lows
  

Quote:The revised tax plan that Republican presidential nominee Donald Trump will release today was reportedly designed at least in part to reduce the cost of his earlier plan,[1] which would have generated very large revenue losses.[2]  The revised plan now looks similar to the tax plan that House Republican leaders introduced in June, which cost less than Trump’s original plan. 

Moreover, like the House plan, the Trump plan takes advantage of an aggressive approach to “dynamic scoring” that the Tax Foundation uses to estimate how tax cuts affect the economy and the budget, which sharply lowers the estimated revenue loss from certain tax-cut provisions. [3]  We should, however, view such large dynamic effects derived from Tax Foundation estimates with considerable skepticism.  That’s because the Tax Foundation, with its unusually large dynamic estimates, is considerably outside the analytic mainstream.

In another example, the Tax Foundation estimated that repealing the estate tax would increase national saving and investment so much that it would generate enough new revenue to pay for over 90 percent of its costs.  But CBO has estimated that raising estate taxes — the opposite policy course — would increase national saving available for investment.  And earlier this year, the Tax Foundation estimated that cutting the corporate tax rate by 20 percentage points would generate enough new revenue to pay for 54 percent of the cost, while JCT estimates that corporate rate cuts would have dramatically smaller dynamic revenue impacts.

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In a 2015 piece for The New York Times’ “The Upshot,” Josh Barro reported that in discussions of the Tax Foundation model “with 10 public finance economists ranging across the ideological spectrum, all … said its estimates of the economic effects of tax cuts were too aggressive. ”a  Here are some key excerpts from the Barro article.

Quote:The optimistic results come mostly from assumptions about business investment being wildly responsive to tax policy. . . .
This assumption led various economists to invoke the names of small islands.
“That’s true for the Netherlands Antilles, it’s not true for us,” said Doug Holtz-Eakin, the former head of the Congressional Budget Office who was John McCain’s top economic adviser during his 2008 campaign.

“It’s a model that might be appropriate for Bermuda,” [Boston University professor Laurence] Kotlikoff said.
In a very small, very open economy, the Tax Foundation might be right:  Cuts in investment taxes would drive a flood of foreign capital, producing a huge percentage increase in investment.  But the United States is simply too big for that to work.  The U.S. economy also is not perfectly open; for example, we have some restrictions on trade.  Therefore, estimates of the amount of investment created by investment tax cuts should be more modest.  Economists also criticized the Tax Foundation model for assuming all that new investment would fall into place very rapidly, and for failing to address economic effects from spending cuts or increased borrowing that the tax cuts would require in their first years.

Quote:The plan would treat carried interest as regular income, eliminating a loophole that allowed wealthy investment managers to pay an artificially low income tax rate.

However, it appears to leave in place an even bigger loophole by treating pass-through income from a corporation as business income. This would enable business owners to shelter massive amounts of income from taxation. Trump also pledged a major decrease in regulation of business activity including, oddly, a promise to eliminate food safety requirements that cover “farm and food production hygiene, food packaging, food temperatures.”

Quote:Later he said of the new plan that the wealthy would end up paying more, while under his new plan, “Everybody’s getting a tax cut, especially the middle class.” But the new plan is out, as is a new analysis from the Tax Foundation. And it does not find this to be the case.

There is some confusion about how Trump’s plan would treat income individuals make from pass-through businesses, which pay tax through the individual tax code by immediately showing up on the owners’ own tax bills and not through the corporate rate. Think an LLC, not Google or McDonald’s. The campaign hasn’t adequately specified whether this income will be subject to the top rate on income — 33 percent— or the lower corporate tax rate of 15 percent.

Many pass-through businesses are quite small, while others are larger, like law and real estate firms. Trump’s own business, the Trump Organization, is an LLC, so allowing all income from it to be taxed at the lower 15 percent rate would give him an enormous break.

But either way, one thing is clear: the middle class will get less than Trump had originally planned, while the rich will get more. Those in the middle three-fifths of the income scale would have seen their incomes boosted by 2.2 percent, 6 percent, and 7.3 percent under his original proposal; those increases have been sharply reduced to 0.8, 1.3, and 1.9 percent.

Meanwhile, depending on how passthrough income is handled, the richest Americans also see their tax cut pared back, but not by nearly as much. Originally, the top 10 percent would have seen a 13.6 percent increase in its come and the top 1 percent would have gotten a whopping 20.7 percent. Those have been cut back to either 5.4 or 8.3 percent and 10.2 or 16 percent, respectively, depending on the details.


CREDIT: Tax Foundation

The rich, therefore, still get the majority of the benefit from Trump’s tax plan.
The Tax Foundation has more bad news for Trump. Last week as he unveiled his plans, he claimed they would create as many as 25 million jobs within ten years. But the analysis found that his tax plan would only create somewhere between 1.8 million and 2.2 million jobs over a decade, which would mean the rest of the more than 20 million jobs would have to somehow be a result of his trade, immigration, and energy plans.

The Tax Foundation also relies on a questionable method to get to these numbers, deploying the dynamic scoring model that bakes in assumptions about how tax cuts will affect future economic growth. Those assumptions are almost always impossible to make with certainty, and they also assume tax cuts lead to big growth, which is rarely the case.

Trump’s tax package also remains costly. Originally the Tax Foundation had found that his first plan would cost $10 trillion over a decade; while the new one has a much lower price tag, it’s still $4.4 trillion or $5.9 trillion on a static basis, depending on the treatment of passthrough income, or $2.6 trillion to $3.9 trillion with dynamic scoring..

Quote:Nobel Prize-winning economist and "The Euro" author Joseph Stiglitz explains how Donald Trump is wrong about the economy.

Quote:The Tax Foundation reckons that Trump's plan to slash personal and corporate taxes would reduce federal revenue by between $4.4 trillion and $5.9 trillion over a decade, not assuming any possible pro-growth economic feedback. But even when optimistically factoring in better incentives to work and invest — what tax wonks call "dynamic scoring" — the plan would still lose between $2.6 trillion and $3.9 trillion over the next decade. That means that even assuming gangbusters growth, Trump would greatly worsen the nation's debt situation. What's more, none of this added Trump debt accounts for the massive new spending Trump has promised on the military and infrastructure. 

In a new analysis, Peterson looks at what might happen if the Trump administration imposed a big tariff on imports from China and Mexico, with those nations responding in kind. The projected result would be recession and the loss of nearly 5 million jobs at the downturn's nadir in 2019. And depending on how exactly the conflict played out and how global supply chains were affected, American consumers — at least those who still had jobs — might find it tough to buy their favorite electronic gadgets.

Quote:One thing that is already painfully clear, though, is that there are two vastly different sets of rules governing Americans’ economic lives – one for poor and working people, and another for Trump and the rest of the rich and famous. The odds of him rewriting those rules are about as great as the amount of money he shelled over to the IRS in 1995.

Quote:Donald Trump and Hillary Clinton are dramatically different presidential candidates—and that extends to their tax plans. New analysis by the nonpartisan Tax Policy Center shows that Trump’s tax plan would cut taxes for most workers, with the richest benefiting the most. The top 1% of earners would enjoy an average tax cut of $214,690 per year. The top one-tenth of 1% would save $1.066 million. Hillary Clinton’s tax plan would have the opposite effect on wealthy taxpayers. The top 1% would pay an extra $117,760 per year, with the tax bill for the top 0.1% rising $805,250. Trump’s tax cuts would swell the national debt by $7.2 trillion. Clinton’s tax hikes would cut it by $1.4 trillion. Here’s how the plans compare on a few basic measures:

Quote:Gross said the proposals so far from the transition team had shown nothing to benefit the working-class Americans who helped propel Trump to his unexpected victory. "But while the Fox promised jobs and to make America great again, his policies of greater defense and infrastructure spending combined with lower corporate taxes to invigorate the private sector continue to favor capital versus labor, markets versus wages, and is a continuation of the status quo," the letter said.

Gross said such policies, like a lower corporate tax rate, were misguided given that the effective tax rates on average for S&P 500 companies were well below the statutory rate of 35% anyway. He also said the idea of a tax holiday to bring cash back in from overseas would not have the effect that Trump has promised. "The last time such a 'pardon' was put into law in 2004, no noticeable pickup in investment took place," Gross wrote. "Of the $362 billion that earned a 'tax holiday', most went to dividends, corporate bonuses, and stock buybacks."

"Both the Clinton Democrats and almost all Republicans represent the corporate status quo that favors markets versus wages; Wall Street versus Main Street," the letter said. "That's why the American public and indeed global citizens will continually take a wrong turn in their efforts to neuter the establishment and to regain several decades' lost momentum in real wages versus real profits."

Gross, for his part, believes a government-led program to employ Americans such as John F. Kennedy's AmeriCorps or Franklin D. Roosevelt's New Deal employment programs would be a better method of solving Americans ills.