Wednesday, April 26, 2017

The Trump administration’s magical thinking on taxes would bust the budget

PRESIDENT TRUMP is set to reveal the outlines of a tax reform plan Wednesday. The country will be improved if Mr. Trump leads the way toward lower rates, fewer loopholes and a simpler code. Where the plan could go dangerously astray is if the administration bases it on wishful thinking — specifically, that tax-cutting will pay for itself. Specifics have been sketchy in the run-up to Wednesday’s announcement, in part because administration officials appear to be of different minds. But a few details emerged early in the week. The Wall Street Journal reported that Mr. Trump wants to reduce the corporate tax rate from 35 percent to 15 percent and the top tax rate on so-called pass-through companies from 39.6 percent also to 15 percent. According to the nonpartisan Tax Policy Center, slashing the corporate rate by such a large amount would reduce revenue by $2.4 trillion over a decade, which is half of everything the government will spend in fiscal 2017. Cutting the tax on pass-throughs, meanwhile, would boost tax avoidance by encouraging people to take wages in the form of lower-taxed pass-through income.

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