GOP Lays Out Tax Overhaul Plan
DAVID GREENE, HOST:
President Trump and Republican congressional leaders have unveiled their plan for the most sweeping overhaul of the federal tax code in more than three decades. They are proposing deep cuts in both individual and corporate tax rates. They say this will help to supercharge a slow-growing economy. Now, while many of the details still to be filled in, House and Senate GOP leaders have been meeting for months now with the treasury secretary and also a top White House economic adviser to fashion a plan they can agree on. The president is going to be promoting this plan this afternoon at the Indiana State Fairgrounds in Indianapolis. And we are joined now by NPR's Scott Horsley to work through this new plan.
Hey there, Scott.
SCOTT HORSLEY, BYLINE: Good to be with you, David.
GREENE: So what are the highlights here?
HORSLEY: As you say, it cuts the top individual tax rate from 39 percent-plus down to about 35 percent. It cuts the corporate rate from 35 percent to 20 percent. And it creates a new 25 percent rate for so-called pass-through businesses. Those are companies that now pay taxes at the individual rate. The plan would stop taxing multinational companies on the profits they make overseas. And for at least five years, it would allow companies to write off their investments immediately rather than having to deduct those investments over time as they do now.
GREENE: OK. So this is a lot to digest. Is there a way to summarize who might benefit the most from this?
HORSLEY: Republicans are promoting this as a boost for the middle class. This is a little preview that President Trump offered to reporters earlier this month.
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PRESIDENT DONALD TRUMP: The rich will not be gaining at all with this plan. We're not - we're looking for the middle class, and we're looking for jobs, jobs meaning companies. So we're looking at - for the middle class, and we're looking at jobs.
HORSLEY: Democrats are skeptical, though, and they're calling this a windfall for the wealthy. It does double the standard deduction, which would save some money for people at the lower end of the income ladder and also make filing easier. But this plan would also do away with the estate tax, which is only paid by the wealthiest families, those with assets of more than $5.5 million. It eliminates the alternative minimum tax, which mostly hits upper-income taxpayers. And the cut to the corporate tax would primarily benefit wealthy investors, not ordinary workers.
Finally, that cut in the individual tax rate - that's only paid, right now, by people making well above $400,000 a year. However, the people who put this plan together did leave room for congressional tax writers to add an additional, higher tax bracket if that's what's needed to keep from shifting the burden from the top of the income ladder down to the lower end.
GREENE: OK. But it sounds like what we're going to be hearing from Democrats pounding this message is that this is a plan that really is helping the wealthy, which makes me wonder - you know, it's crafted only by Republicans. Are they helping to push this through with no Democratic support at all? Or are they hoping to get some support from at least some Democratic lawmakers?
HORSLEY: Republicans have teed up the same procedural tactic that they tried to use, unsuccessfully, to pass through the Obamacare repeal on a party line vote and employed...
GREENE: Which failed several times when using that - narrowly.
HORSLEY: Exactly. But that was a party line tactic, and they've cued that up again in this case. But the president is also courting Democratic lawmakers. Here's how that described by the White House legislative director, Marc Short.
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MARC SHORT: We hope we can earn Democrats' support on this plan. As you know, Senator Donnelly from Indiana will be traveling with the president today. And Senator Heitkamp traveled with us to North Dakota a couple of weeks ago. And we believe that they, too, recognize how outdated the corporate tax code is, and we hope that we can earn their support.
HORSLEY: Now, what Senators Donnelly and Heitkamp have in common is they're Democrats from red states that President Trump won. And they're both up for re-election in 2018. Claire McCaskill of Missouri is also in that camp, along with a number of other Democratic senators. And those are the Democrats the president and Republicans will be trying to pick off in this tax cut effort.
GREENE: Interesting political spot that they're all in. Any idea how much these tax cuts would cost the federal government and what the White House and Republicans are going to do to grapple with that?
HORSLEY: It's hard to say for sure because we haven't seen all the details. But we are talking trillions of dollars over the next decade. Now, some of that can be recouped by closing loopholes. But the only loophole that has been identified so far for closing is the tax break for state and local taxes. Republicans say they will be preserving the tax breaks for mortgage interest and charitable contributions.
GREENE: So if there is going to be a loss in revenue and a cost to the federal government, the Republicans are really relying on making this argument that this will help the overall economy. How solid is that argument?
HORSLEY: Yeah, they are really counting on revving up the economy to keep from ballooning the deficit. But most economists, even conservative economists, say a boost in growth would only offset a fraction of the lost government revenue. Goldman Sachs put the estimate at, you know, one tenth or maybe two tenths of a percent over the next couple of years - not a huge spike in economic growth.
GREENE: All right. NPR's Scott Horsley talking to us about the new tax overhaul plan coming from the White House and Republican congressional leaders.
HORSLEY: You're welcome.
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