In an effort to garner Republican agreement on legislation to revamp the U.S. tax system, President Trump has reportedly thrown out the plan from his campaign and is starting from scratch.
White House aides report Trump still aims to reduce tax rates to quickly stimulate economic growth, while not greatly increasing the budget deficit — an extremely challenging goal that has caused Trump to apparently scrap plans by economists who helped assemble one of his campaign’s tax overhaul proposals.
“It’s a little frustrating that they feel they have to write a new tax plan when they have a tax plan,” stated Steven Moore, an economist at the conservative Heritage Foundation who helped to create a plan for the Trump campaign. However, that plan would increase the deficit.
Trump is also reported to have turned down proposals for raising revenues in exchange for tax cuts, such as a carbon tax, but has not yet specified to which trade-offs he may be open.
Due to the failure to repeal and replace the Affordable Care Act last month, the White House appears to be using a different approach by taking a more active role in writing legislation, versus accepting a bill written by lawmakers.
The leading tax blueprint comes from Rep. Kevin Brady (R-Texas), who is the chairman of the Ways and Means Committee. He has proposed a border adjustment system that would end corporate deductions on imports, which would raise $1 trillion over 10 years and possibly fund Trump’s goal to lower corporate taxes.
Unfortunately, Brady’s proposal worries retailers who say it would lead to higher prices and put millions of jobs at risk. Lawmakers also believe it could violate rules of the World Trade Organization (WTO).
Another proposal submitted by a GOP lobbyist would require a new, dedicated funding source for Social Security. The proposal suggests placing a value-added tax on imports, which would be in line with WTO rules and generate $12 trillion over 10 years. This could enable the end of the 12.4 percent payroll tax (split evenly between employees and employers) while keeping the health insurance tax in place, but it would no longer fund Social Security.
While some may see this as a bipartisan solution because former President Obama cut payroll tax after the recession, many believe Democrats will firmly oppose the idea as they do not want anything to undermine Social Security.
While Trump does want to pass the bill with Republican consensus, some are indicating he is also trying to appeal to Democrats.
Some say Trump’s lack of a clear plan, to date, may make it impossible to meet the current August deadline for a tax overhaul set by Treasury Secretary Steve Mnuchin.
Alan Cole, an economist at the conservative Tax Foundation, stated, “The White House is going to need its own clear direction, or it’s going to need to defer to Congress, but saying that your plan is forthcoming and then not producing a plan kind of puts everything in stasis.”
However, others say what is being reported to the public is not representative of the work going on behind the scenes.
A member of the Senate Finance Committee, Sen. Rob Portman, (R-Ohio), stated, “It’s not really what’s going on. What’s going on is, they’re working … on various ideas.”
H/T: Associated Press
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