Following their botched effort to repeal and replace Obamacare, the White House and Republican politicians are pivoting towards tax reform.
The White House released an outline of President Donald Trump’s tax plan on April 26 that slashed corporate and individual tax rates, reorganized the tax bracket structure and eliminated the estate tax and alternative minimum tax, both of which impact the country’s wealthiest households.
Amid criticism that his proposals are regressive and disproportionately benefit the country’s highest earners, Trump told the Wall Street Journal on July 25 he was open to higher taxes on the wealthy.
“The truth is, the people I care most about are the middle-income people in this country who have gotten screwed,” Trump told the newspaper. “And if there’s upward revision, it’s going to be on high-income people.”
Republican Senate Majority Leader Mitch McConnell has said tax legislation must be revenue neutral, meaning tax cuts are offset so they don’t add to the deficit.
Trump’s initial proposal could cut federal revenues by as much as $7.8 trillion in a decade, according to a study by the Tax Policy Center, a nonpartisan think tank.
How Republicans plan to raise revenue in the face of tax cuts remains to be seen.
Michael Wenz, an associate professor and coordinator of the economics department at Northeastern Illinois University, thinks lowering the corporate tax rate from 35 to 15 percent, as the White House proposed in April, could motivate U.S. businesses to focus on growth.
“The 35 percent statutory U.S. corporate income tax rate is one of the highest in the world, and lowering the tax rate would address some significant distortions in the economy,” Wenz said. ”Much less effort would be devoted to tax avoidance and lobbying for loopholes.”
Lower corporate taxes may also keep businesses on U.S. soil, according to Mark Glennon, founder of the news blog WirePoints and a former venture capitalist and financial adviser.
“If you’ve been to, say, Ireland recently you’ve seen the results,” Glennon said. “Many of our biggest companies have huge operations there because their corporate rate is less than half of ours.”
While the Trump administration indicated it was conferring with more than 200 members of Congress to enact tax reform in a July 27 press statement, the recent failure of the GOP Senate health care bill illustrates that not all members of the president’s political party are in lockstep on important policy decisions.
Wenz and Glennon join host Phil Ponce to offer their insights on U.S. tax policy.
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April 26: President Donald Trump’s tax plan was formally rolled out Wednesday. As promised on the campaign trail, the plan includes several business-friendly tax measures.