The Trump Administration released April 26 a one-page outline of tax reform principles and objectives it intends to pursue this year. The document calls for reductions in individual and corporate tax rates to be paid for, at least in part, by economic growth the Administration estimates the proposed changes will create and by eliminating tax deductions and other tax “breaks.”
Specifically, the proposed changes include lowering the corporate tax rate (including for pass-through corporations) to 15 percent from 35 percent and the tax rate for top individual earners to 35 percent from 39.6 percent. The proposal also calls for the elimination of the estate tax, Alternative Minimum Tax, and Affordable Care Act surtax on high incomes.
The document also says the Administration proposes to double the standard deduction for all individuals, provide tax relief for families with child and dependent care expenses, “eliminate targeted tax breaks that mainly benefit the wealthiest individuals,” and “protect the home ownership and charitable gift tax deductions.” In its “Business Reform” section, the paper calls for the elimination of “tax breaks for special interests.”
The paper does not provide any information on what specific tax credits, deductions, or exemptions the Administration proposes to eliminate. It does not mention the Housing Credit, municipal bonds, or private activity bonds. During a White House briefing Wednesday, Treasury Secretary Mnuchin said, “we are going to eliminate on the personal side all tax deductions other than mortgage interest and charitable deductions.”
Reducing the tax rates to such an extent without increasing the deficit would require Congress to rescind a number of tax benefits. However, Administration officials have in recent days said that they do not believe that it is necessary for tax reform legislation to be scored as revenue-neutral, arguing that tax reform will spur stronger economic growth and increased revenues.
Administration officials say they intend to hold listening sessions with stakeholders through the month of May and work with House and Senate leaders to develop a more detailed plan. Republican congressional leaders expressed support for the goals of the President’s plan, but indicated that they intend to move forward with their own tax reform legislation in consultation with the Administration. The House Ways & Means Committee is expected to begin hearings soon on tax reform legislation it is developing.