(Bloomberg) Criticized by Republican presidential rivals as having a loose grip on policy, billionaire Donald Trump laid out a tax plan on Monday that he said will increase the burden on hedge fund managers, cut rates for corporations and the middle class, and eliminate payments for more of the poor.
The plan is “going to cost me a fortune,” Trump said at a news conference at Trump Tower in New York.
It would eliminate the Alternative Minimum Tax, the so- called marriage penalty, the estate tax, and the carried interest deduction, while keeping the mortgage interest deduction, he said. Single people earning less than $25,000 per year or married people earning less than $50,000 per year would pay no income tax.
Trump called for lowering the tax rate on all businesses to 15 percent. The highest individual rate under his plan would be 25 percent, versus the current top rate of 39.6 percent, he said.
“People in the low-income brackets that are supposed to be paying taxes, many of them don't anyway,” Trump said during an interview on 60 Minutes that aired on Sunday, previewing the plan.
Trump also said he would increase taxes on Chinese imports if the country continues to devalue its currency, and would tax products made by companies that moved operations overseas to take advantage of lower rates. It wasn't clear in the interview if those planks would be part of his tax plan on Monday, and his campaign didn't return an e-mail and phone call seeking comment.
Taxing carried interest as normal income would generate about $17 billion over 10 years, according to the Congressional Budget Office, a nonpartisan scorekeeper.
Closing loopholes such as carried interest would fall in line with “basic conservatism and Republican orthodoxy,” economist Stephen Moore said in an interview prior to Trump's news conference.
“If Trump's plan is going to sell with supply-side economists, the tax rates across the board are going to have to come down,” said Moore, who has consulted with Rand Paul and Jeb Bush on their tax plans and said he spoke to Trump's team about six weeks ago.
Trump has been the front-runner for the Republican presidential nomination for the past three months, but his lead in national polls has shrunk during the past 10 days. An NBC/Wall Street Journal survey released on Sunday showed the 69- year-old celebrity real estate mogul with a lead of just 1 percentage point over retired neurosurgeon Ben Carson.
Trump's lead has tightened since the second Republican president debate on Sept. 16, when he was the target of criticism from several rivals on stage, and was silent for long stretches as the discussion veered into policy issues.
Republican voters, meanwhile, have said they trust Trump on economic policy. In a CNN poll of Iowa Republicans last month, Trump was picked as the best GOP candidate to handle the economy. In a Gallup poll in July, the only issue that a majority of Republicans said Trump would do a good job of handling was the economy.
Still, the criticisms from his rivals seem to be resonating with Trump, who has said he “would be the best jobs president that God ever created.”
In a town-hall meeting in South Carolina on Wednesday, he boasted that his tax plan would be “long on policy.”
“It's going to be very specific,” Trump told voters in Columbia. “It's a plan that's going to create great incentives, and I think it's going to be a plan that's going to make people happy—other than maybe the hedge fund guys.”
Jared Bernstein, former chief economist for Vice President Joe Biden, a potential Democratic presidential campaign, said before Trump's news conference there were “a couple of inherent problems” with Trump's plan. He pointed out that about 40 percent of Americans are exempt from paying federal income taxes, and said the tax burden on the middle class “comes from other places.”
“Lowering payroll taxes, that's one thing, but then you have a Social Security funding problem,” Bernstein said. Trump said on 60 Minutes that he no longer wants to raise the retirement age to 70, and would not cut Social Security benefits.
Trump suggested that his tax plan would, at least initially, add to the federal deficit, much like the plans from Bush and Rubio. Like his two rivals, Trump said his proposal relies on projected growth to offset losses. “We're going to grow the economy so much,” he said on 60 Minutes.
Trump said he would make up for all that lost tax revenue by bringing more jobs back from overseas and would do so by not allowing foreign competitors like China to devalue their currency. If competitors don't comply, Trump will tax their imports, he said.
“If they don't come to the table, they're going to have a tax when they put their products into this country,” he said. “And they're going to behave.”
When host Scott Pelley brought up how such a practice could violate the North American Free Trade Agreement in place with Mexico, Trump said, “We will either renegotiate it or we will break it. Because, you know, every agreement has an end.”
This idea, Bernstein said, isn't terrible. And Trump's not the first one to bring it up.
“It actually makes sense to have some sort of an actionable, enforceable discipline. One idea is called countervailing duties, which is actually what he's thinking about there,” Bernstein said. “It may be the case that such ideas would violate trade agreements, but such agreements can be renegotiated.”
Bernstein pointed out that President Barack Obama also brought up renegotiating NAFTA when he was running. And Trump certainly is not the only candidate in the race to criticize the agreement. Vermont Senator Bernie Sanders has, for instance, been voicing opposition to it since its dawn.
On Sunday, Pelley told Trump his opposition to the trade deal could be seen as an attack on free trade, a cornerstone of the Republican platform. Trump's reply carried with it a palpable similarity to the rhetoric used by the self-declared socialist.
“Scott, we need fair trade,” Trump said. “Not free trade. We need fair trade. It’s got to be fair.”
Register or login for access to this item and much more
All Accounting Today content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access