Donald Trump’s advisors have tried to spin his economic address earlier this week as yet another reboot of his campaign and of his tax reform plan.

Trump’s speech, coupled with the abrupt disappearance of his original tax plan from his campaign website, made it clear that his original tax plan has been “fired.”

He now embraces the higher personal income tax rate structure proposed by House Speaker Paul Ryan, and he also proposes a new tax break for child care expenses. Overall, however, the campaign has left many questions unanswered by releasing only limited details. This may be a deliberate strategy or a sign that the campaign has not fully fleshed out a revised proposal.

Among the unanswered questions:

1) How aggressively will Trump seek to close corporate loopholes? Even at the current 35 percent rate, U.S. corporate taxes are lower than those of most economically advanced/OECD nations. If the United States cuts its corporate tax rate without broadening the tax base, the nation’s corporate tax collections would spiral down and blow an even bigger hole in the federal budget. Corporate tax collections, mind you, are already at historically low levels. Under a best-case scenario argument for cutting the U.S. corporate income-tax rate, the U.S. would have to also aggressively close corporate loopholes and perhaps could settle on a revenue-neutral rate of 28 percent. But Trump proposes to drop the rate far below that level without closing even a single corporate loophole.

2) What about individual tax breaks? The personal income tax is equally riddled with unwarranted loopholes, and any sensible tax reform strategy must discuss how to deal with the elephant in the room: itemized deductions for mortgage interest, charitable contributions, and other expenses. Trump’s revised blueprint is silent on this point.

3) How would the revised Trump plan affect federal revenuesand the budget deficit? This is an area in which the contrast between Trump and his general election opponent, Hillary Clinton, has been most stark. Trump has proposed to cut taxes by $10 trillion over a decade, while Clinton’s plan would reduce the federal deficit somewhat over this period.

These blank spots notwithstanding, the dramatic reductions in tax rates outlined by Trump—a 15 percent corporate tax rate, a top rate of 33 percent for most individual income, a 15 percent rate on pass-through income, and the outright repeal of the estate tax—are a clear indication that no matter how aggressively Trump seeks to close loopholes, his plan overall would be a budget-busting giveaway to the best-off Americans.

Tax reform is never easy, but some parts are more painless than others. The easy part is cutting tax rates, and on this front the Trump plan is quite clear. Trump would repeal the estate tax while sharply cutting personal and corporate income tax rates.

The hard part of tax reform is paying for tax cuts: which tax breaks will be eliminated to make rate reductions affordable? And on this point, Trump remains virtually silent. Indeed, the biggest loophole-related change he announced this week is the full expensing of capital investments, which would create a giant new hole in the tax base. Until Trump provides more specifics on the hard work of loophole closing, the collection of ideas he presented this week may fit into the mold of a hyperbolic slogan, but it’s certainly not a real plan.  

 

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