San Antonio Express-News: White House unveils major tax overhaul

Treasury Secretary Steven Mnuchin and National Economic Director Gary Cohn announce President Donald Trump's tax proposals Wednesday.

WASHINGTON — President Donald Trump's call for a dramatic overhaul of the tax code sets in motion his most ambitious legislative initiative to date, testing whether he can cut the deal of his life on an issue that has long bedeviled Washington.

On Wednesday, Trump issued a one-page outline for changes to the tax code, pinpointing numerous changes he would make that would affect almost every American.

He wants to replace the seven income tax brackets with three, 10, 25 and 35 percent; cut the corporate tax rate by more than 50 percent; abolish the alternative-minimum tax and estate tax; and create new incentives to simplify filing returns.

But the White House stopped short of answering key questions that could decide the plan's fate. For example, Trump administration officials didn't address how much the plan would reduce federal revenue or grow the debt. They also didn't specify what income levels would trigger the new system for paying individual income taxes.

The goal, White House officials said, was to cut taxes so much and so fast that it led to immediate economic growth, creating more jobs and producing trillions of dollars in new revenue and wealth over the next decade.

Despite its brevity — it was less than 200 words and contained just seven numbers — the document marked the most pointed blueprint Trump has presented Congress on any matter.

"This is about economic growth, job creation, America first, and that's what (Trump) cares about," White House National Economic Council Director Gary Cohn said. "Our tax plan is a big leg of that stool. It's a big leg. And in many respects, he thinks it's the most important leg."

The plan now must navigate a legislative and political gantlet on Capitol Hill that has killed numerous other efforts to rework the tax code.

President Ronald Reagan was the last to shepherd a major tax overhaul through Washington, but he did it by working with Democrats to cut a deal. Treasury Secretary Steven Mnuchin said Wednesday that he would like to negotiate details of the plan with Democrats but would cut them out of talks if necessary and seek only support from Republicans, perhaps by pursuing a strategy known as "reconciliation." Using that process, a tax overhaul could escape a 60-vote requirement in the Senate, but it also would have a 10-year expiration date.

U.S. Rep. Lloyd Doggett's reaction mirrored Democratic opposition sounding in Congress.

"The claim that his multitrillion dollar tax cut will pay for itself is as incredible as the claim that Mexico will pay for his multibillion dollar border wall," Doggett, D-San Antonio, said in a release.

Doggett, the lead Democrat on the Ways and Means tax-writing panel, has pressed without success for a vote to force Trump to release his tax returns.

"Without an end to the Republican cover-up of Trump's tax returns, we cannot determine whether this is mostly just more self-enrichment for the Trump family," Doggett added.

Trump's proposal now poses key tests for both parties. Republicans, who for years chided President Barack Obama about any plan to raise the deficit, must decide whether to back a plan that many budget experts believe will add to record levels of government debt. The Committee for a Responsible Federal Budget said the plan would likely lead to a loss in government revenue by roughly $5.5 trillion over 10 years.

But so far, key Republicans praised the core of Trump's plan and signaled a willingness to negotiate with him on key details.

Speaking Wednesday on Capitol Hill, House Speaker Paul D. Ryan (R-Wis.) called Trump's framework "a critical step forward in this effort."

"We've been briefed on what they are going to do, and it is basically along exactly the same lines we want to go," Ryan said. "So we see this as progress being made, showing that we are moving and getting on the same page. We see this as a good thing."

Democrats, meanwhile, must decide whether to negotiate with a Republican president who is threatening to pull away tax revenue that pays for many of their cherished social programs.

"This is an unprincipled tax plan that will result in cuts for the (wealthiest Americans), conflicts for the president, crippling debt for America and crumbs for the working people," said Sen. Ron Wyden, Ore., the top Democrat on the Senate Finance Committee.

Trump's proposal includes major changes to both of the major elements of the tax code, the individual side and the business side.

The proposal would also roughly double the standard deduction that Americans can use to reduce their taxable income. The deduction for married couples would rise from $12,600 to $24,000. This would incentivize people not to itemize their tax returns and instead use the larger standard deduction, simplifying the process and potentially saving taxpayers thousands of dollars each year. It may also change how people value certain tax breaks: For example, fewer people might buy homes with the help of the mortgage interest deduction if they don't itemize their taxes.

The White House plan would eliminate the alternative-minimum tax and the estate tax, provisions that raise billions of dollars each year and mainly raise the taxes paid by wealthier Americans.

To offset the loss of revenue from lower tax rates and other changes, Cohn and Mnuchin said they were proposing to eliminate virtually all tax deductions that Americans claim, provisions that they argued primarily benefited wealthier Americans. Cohn said they would preserve tax breaks for mortgage interest, retirement savings and charitable giving. But almost all others would be jettisoned.

For businesses, Trump's proposal would lower the corporate tax rate from 35 percent to 15 percent.

The White House is also proposing a one-time tax "holiday" to encourage companies to bring several trillions of dollars held in other countries back into the United States. They didn't specify what that tax rate would be, saying it's part of negotiations on Capitol Hill, but they said they believed providing this incentive would bring money back for investment and hiring.

"We expect that trillions of dollars will come back on shore and will be reinvested here in the United States, for capital goods and job creation," Mnuchin said.

A key part of Trump's tax plan during the campaign was to levy a tax or tariff against companies that move overseas and then try to sell their products back to U.S. consumers. Cohn and Mnuchin said they were still looking at alternatives on how to structure this idea, and it was not an element of the plan rolled out Wednesday.

Mnuchin said their goal was to permanently change the tax code, but they would consider a shorter-term change if necessary to win political support.

"This is what's important to get the American economy going," Mnuchin said. "So I hope (Democrats) don't stand in the way. And I hope we see many Democrats who cross the aisle and support this. Having said that, if they don't, we are prepared to look at the reconciliation process."