President-Elect Trump Plans To Slash Taxes On Businesses — Including His Own A big part of Donald Trump's proposed tax cut would go to corporations. The president-elect says that will fuel investment and growth; critics say the plan would explode the federal budget deficit.
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President-Elect Trump Plans To Slash Taxes On Businesses — Including His Own

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President-Elect Trump Plans To Slash Taxes On Businesses — Including His Own

President-Elect Trump Plans To Slash Taxes On Businesses — Including His Own

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KELLY MCEVERS, HOST:

Another top issue for the upcoming Trump administration is tax policy. During his campaign, Trump promised the biggest tax cut since Ronald Reagan's conservative revolution in the 1980s. A big chunk of Trump's tax cut would go to businesses. The president elect says that will lead to more investment and growth. Skeptics say the tax plan would explode deficits. NPR's John Ydstie reports.

JOHN YDSTIE, BYLINE: The president elect's proposal would slash the top business tax rate from 35 percent, the highest in the industrial world, to just 15 percent. But, Trump says, at the same time as he's cutting tax rates, he'll also close lucrative tax loopholes, like one called carried interest. It allows billionaire hedge fund managers to cut their taxes in half on big chunks of their income.

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DONALD TRUMP: Well, one thing I'd do is get rid of carried interest. The - one of the greatest provisions for people like me, to be honest with you - I give up a lot when I run.

YDSTIE: Len Burman of the independent Tax Policy Center says, far from being hurt, overall, Trump will probably be a huge beneficiary of his proposed tax plan.

LEN BURMAN: Donald Trump has said that his 15 percent rate would apply to all businesses. And if that's the case, billionaire real estate magnets will get a very big tax cut.

YDSTIE: Steve Moore, a fellow at the Heritage Foundation and a senior economic adviser to Trump, helped develop the tax cut proposal. Moore says it would not just aid big businesses but also small ones.

STEVE MOORE: Every small business in America would also get this 15 percent tax rate as long as they reinvest the profits back into the company.

YDSTIE: But the Tax Policy Center sees a huge loophole opening here, one that would benefit high income people. Len Burman says these top wage earners could decide to transform themselves into business contractors.

BURMAN: I would tell my employer I'm now a contractor rather than an employee. And, you know, I'll send you an invoice for my services. And then I'll pay a 15 percent tax rate instead of a 33 percent tax rate.

YDSTIE: The Tax Policy Center estimates this would cost the U.S. government $650 billion in lost tax revenue over 10 years. But Steve Moore says if individual wage earners tried this strategy, the Trump administration would respond.

MOORE: That's scamming the system, and we want to make sure that people don't have an opportunity to shift their income from one type to another just to take advantage of these lower tax rates. We're going to try to slam shut those loopholes.

YDSTIE: That's easier said than done, says Len Burman. Steve Moore says in addition to the huge cut in business tax rates, the Trump proposal would also allow businesses to immediately write off the cost of investments rather than deducting them over a period of years. The result, he says, will be more investment that will boost worker productivity, wages and growth. And that will produce more tax revenue, he says.

MOORE: Now, look, I'm not saying the tax cuts are going to pay for themselves. But I do think there's an economic growth dividend that you get.

YDSTIE: In the short run, that may be true, says Len Burman. But in the long run, he argues the economy will suffer because the tax cuts will create huge budget deficits and higher interest rates.

BURMAN: Over the long run, there'd be less investment, lower wages and a smaller economy than there would have been without the plan.

YDSTIE: Steve Moore says any shortfall in tax revenue will be covered by cuts in federal spending. If that's the case, it would require cutting about half of all the government's non-defense discretionary spending, which includes federal funding for law enforcement, education, transportation and research. John Ydstie, NPR News, Washington.

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