Maryland Politics Your source of news and intelligence from the Mason-Dixon line to the Potomac

Trump, GOP outline proposal to lower, simplify taxes

President Donald Trump outlined a sweeping plan Wednesday to lower corporate taxes and simplify the rules for individual filers, the first step in what will be a contentious debate over a top White House priority.

With GOP hopes of repealing Obamacare once again dashed, the Trump administration and Republican lawmakers, eager for a legislative victory, promised to move quickly on what would be the farthest-reaching overhaul of the nation’s tax code since 1986.

Trump called on Congress to slash the corporate tax rate, reduce from seven to three the number of brackets for individuals and families, and nearly double the standard deduction claimed by the millions of Americans who do not itemize their returns.

But Trump left key details to be hashed out by lawmakers, and Democrats swiftly criticized the measure.

Analysts cautioned that the proposal could harm high-income states like Maryland, where filers are more likely to claim certain itemized deductions. And they warned that some of Trump’s ideas could wind up reducing state revenue at a time when Maryland officials are already preparing for shortfalls.

“This is a once-in-a-generation opportunity,” Trump said at the Indiana State Fairgrounds in Indianapolis. “Tax reform has not historically been a partisan issue, and it does not have to be partisan issue today.”

Trump has promised that the measure will benefit middle-class families, but the lack of specificity makes that difficult to assess. While the administration is proposing new tax brackets, it did not set income ranges for those brackets. That makes it impossible to determine how much any given family would pay.

“There are too few details to consider this any kind of comprehensive proposal or to evaluate its impact on many critical issues,” said Democratic Sen. Ben Cardin of Maryland, a member of the Senate Finance Committee. “This framework kicks all the hard decisions in reforming our tax code to the [congressional] committees.”

Among the most important outstanding questions is how much revenue the government would lose. Independent analysts have pegged the amount lost to tax cuts in the trillions of dollars over the next decade — a figure that could scare off the mostly conservative lawmakers who have been sounding alarms for decades about federal budget deficits.

“Tax cuts shouldn’t be handed out like Halloween candy,” Maya MacGuineas, president of the Committee for a Responsible Federal Budget, said in a statement. “To grow the economy, they must be paid for, and the details of this plan appear to come up $2 [trillion] to $2.5 trillion short.”

Yet Republican leaders and many conservatives appeared to support the plan. They said the cuts would boost the economy and ultimately pay for themselves.

“The tax plan will restore job growth to the American economy that suffered under the Obama administration — job growth that will result in increased revenue and decrease our budget deficits,” said Republican Rep. Andy Harris of Baltimore County, a member of the conservative House Freedom Caucus.

Trump said repeatedly that he expects “numerous Democrats to come aboard.”

Some Democratic support would give the administration more room to navigate the perilously divided politics on Capitol Hill. But there was little early indication of bipartisan support. Many Democrats blasted the proposal, which was crafted by Republican lawmakers and the White House.

“President Obama … oversaw 75 straight months of job growth,” said Democratic Rep. Elijah E. Cummings of Baltimore. “President Trump is now proposing to squander the gains he inherited on a new tax cut that would overwhelmingly benefit the richest individuals and corporations in our country — just like him and the Trump Organization.”

In Maryland, a state with one of the nation’s highest median incomes, analysts said the Trump plan would have an outsized impact by eliminating the deduction for state and local taxes.

Forty-five percent of Maryland filers took that deduction in 2014, the highest percentage in the country, according to the Tax Policy Center.

Most of the states that would be most affected by ending the deduction — New York, California, Maryland — vote Democratic in national elections.

“It tends to be a deduction that favors those at the higher [end of the] income spectrum,” said Nicole M. Kaeding, an economist with the Tax Foundation.

Trump also proposed eliminating the estate tax, which is paid by people who receive large inheritances. Maryland lawmakers reduced the scope of the state’s estate tax in 2014, but what remains could be further undercut if Washington eliminates the federal tax.

Benjamin Orr, executive director of the Maryland Center on Economic Policy, said Maryland collected $207 million from the tax in 2016. That’s enough, the group has noted, to pay for the state’s behavioral health programs, including inpatient and outpatient addiction treatment.

Orr said Trump’s proposal “heavily favors the wealthy and corporations.”

While many of the plan’s provisions for the middle class are murky, the benefits for wealthy Americans are more immediately clear. Trump would eliminate the alternative minimum tax, created in the 1970s as a way to ensure that rich families didn’t use tax breaks to significantly reduce their liability. There is now bipartisan concern that the AMT has hit the wrong families.

Trump’s plan would reduce the U.S. corporate tax rate from 35 percent to 20 percent.

Businesses have been lobbying heavily for a reduction in the corporate rate. The current U.S. rate is the highest among developed nations, but many companies use deductions and loopholes to pay a lower rate, or avoid paying taxes altogether.

Several of Maryland’s largest and best-known companies — including Under Armour, McCormick & Company and T. Rowe Price — either declined to comment or did not respond to a request seeking comment on Trump’s proposal.

The release of the framework kicks off a scramble by lawmakers to hammer out the details, craft legislation and, if all goes according to the Republican plan, pass a bill by the end of the year.

Meeting that schedule won’t be easy, in part because Trump has set out goals that to some extent contradict each other. Trump wants to cut taxes for business, a move that generally helps upper-income taxpayers. But he has also insisted that his plan won’t amount to a significant tax cut for wealthy Americans.

“My plan is for the working people and my plan is for jobs,” Trump said.

Baltimore Sun reporter Michael Dresser and the Washington Bureau contributed to this article.

john.fritze@baltsun.com

twitter.com/jfritze

Copyright © 2017, The Baltimore Sun, a Baltimore Sun Media Group publication | Place an Ad
32°