Presidential hopeful Donald Trump said he would lower tax rates and slim the federal tax code, cutting millions of people out of any income tax liability at all as he unveiled his plan Monday, joining a growing list of Republicans pushing for a scaled-down, simpler system.
He said he would ax many of the breaks that the wealthy and upper middle class use to avoid paying higher taxes, though he would preserve the charitable and mortgage interest deductions.
The billionaire businessman said some of his wealthy pals wouldn’t be happy with those trims, but he expects his top-tier tax rate of 25 percent, down from the current 39.5 percent, would leave many of them better off anyway. He also proposed cutting the corporate tax rate to 15 percent.
“It’ll simplify the tax code, it’ll grow the American economy at a level that it hasn’t seen for decades. And all of this does not add to our debt or our deficit,” the 69-year-old said.
Budget analysts questioned Mr. Trump’s math, saying he would be hard-pressed to replace the trillions of dollars in revenue lost under his plan.
Kyle E. Pomerleau of the Tax Foundation said Mr. Trump’s plan is “very similar to Jeb Bush’s tax plan, except it will end up being a much larger tax cut.”
“His claims that it is going to be revenue-neutral is probably not accurate. The initial tax cut is so big that it would not be revenue-neutral even with greater revenue growth,” Mr. Pomerleau said.
Earlier this month, former Florida Gov. Jeb Bush proposed his own overhaul that a Tax Foundation analysis said would cut taxes by $3.6 trillion and reduce federal revenue by $1.6 trillion over the next decade, raising questions about what programs Mr. Bush would cut to offset the revenue loss.
For Mr. Trump, the Republican presidential front-runner, it’s his third major policy statement — after an immigration plan and a set of principles on Second Amendment rights — and it puts him in the conversation that is raging within the campaign field.
Sen. Rand Paul of Kentucky, another Republican White House hopeful, captured the sentiment of many grass-roots activists when he videotaped himself at a rifle range shooting up a box filled with tax code volumes. The footage served as a sequel to a video he released a couple of months earlier in which he put the tax code into a wood chipper, chopped it up with a chain saw and lit it on fire.
Despite the mounting aggravation among voters, however, efforts to reshape the tax system have stalled on Capitol Hill, forcing the conversation into the presidential race.
Mr. Trump predicted his plan could send the nation’s gross domestic product growth to as high as 6 percent a year, which is more than twice the current projections for 2017-2020, the period that would cover the next administration.
“We’re going to have growth that will be tremendous,” Mr. Trump said.
Mr. Pomerleau, though, said something’s got to give.
“One of the things that Trump needs to think about is that his plan is going to be a very substantial cut in the amount of revenue the government raises. So, either he has to scale back a bit or think of the cuts he needs to make to make this revenue-neutral,” he said.
Mr. Trump sounded confident about his cost-cutting abilities.
“We are reducing taxes, but at the same time, if I win, if I become president, we will be able to cut so much money and have a better country,” he said. “We won’t be losing anything other than we will be balancing budgets and getting them where they should be.”
Mr. Paul and Sen. Marco Rubio of Florida also have put forward tax fixes and share some ideas with Mr. Trump and Mr. Bush.
The four rivals are calling for condensing tax brackets, as well as reducing marginal income tax rates and ending the “death tax” and alternative minimum tax.
Mr. Trump, however, is not pushing for the sort of territorial tax system or for allowing businesses to deduct capital investments that Mr. Bush, Mr. Rubio and Mr. Paul are advocating.
Mr. Trump would compress the existing seven tax brackets to four, with the top bracket — individuals making more than $150,000 and couples making more than $300,000 — facing a 25 percent taxation rate.
Individuals making less than $25,000 per year and families making less than $50,000 per year would be in the 0 percent bracket, meaning they would pay nothing in income tax, though he said they would still have to file a one-page return with the IRS that says, “I win.”
Those in the lowest bracket would also pay no taxes on long-term capital gains or dividends, while those in the top bracket would pay a 20 percent rate on that kind of investment income.
Mr. Trump’s plan cuts the top corporate tax rate from 35 percent to 15 percent and gives businesses the chance to repatriate their overseas earnings by paying a one-time 10 percent levy.
It also would stop special treatment for carried interest, which taxes hedge fund managers’ income at the lower investment rates rather than the salary and wage rates most Americans pay.
Mr. Bush’s plan calls for three tax brackets — 10 percent, 25 percent and 28 percent, with the top marginal rate applying to individuals making $85,750 or more and $142,200 for joint filers.
Mr. Bush also wants to eliminate certain loopholes and would cap the total number of tax deductions — with the exception of charitable donations — that can be claimed at 2 percent of a filer’s income.
He wants to reduce the top corporate tax rate to 20 percent and tax capital gains and dividends at a top marginal rate of 20 percent.
Mr. Rubio’s proposal would establish two brackets — 15 percent and 25 percent, with the top rate applying to individuals who make more than $75,000, and $150,000 for joint filers.
The freshman lawmaker called for the top corporate rate to be dropped to 25 percent and for capital gains and dividends income to be tax-free.
Mr. Paul wants to set a 14.5 percent flat rate on businesses and on individuals, as well as on capital gains and dividends income.
His plan sets the standard deduction at $15,000 per filer, according to the Tax Foundation.