The Trump administration will spend the coming months pushing for "massive tax cuts and massive tax reform," Treasury Secretary Stephen Mnuchin said Wednesday, unveiling a proposal to cut taxes across the board for people and businesses.
The proposal was released in the lead-up to the 100th day of the Trump administration, and is largely similar to ones floated by Trump during the presidential campaign. The numbers made public included personal income tax brackets of 10%, 25% and 35% — down from a current top rate of 39.6% — and a corporate tax rate of 15%, down from the current top rate of 35%.
The proposal would also end the taxation of corporate profits earned overseas, and give US companies a one-time chance to bring home trillions of dollars in cash that they have kept stashed overseas, largely to avoid paying the current top corporate rate.
But with such proposals set to cut trillions of dollars in government revenue over the coming decade, the administration gave few details for how it would avoid blowing a giant hole in the federal budget. Mnuchin said all income tax deductions, other than charitable giving and mortgage interest, would be eliminated, and that the plan "will pay for itself with growth and reduced deductions and closing loopholes."
Mnuchin returned to the theme often, stressing that a giant round of tax cuts would inspire so much economic growth that government revenues would not suffer. Versions of this claim are often made to support large tax cuts, and have been rejected by many mainstream economists.
One major change from current tax policy would be a massive tax cut for so-called "pass through" businesses, whose profits are passed directly onto the owner's personal income tax statement, where they are currently taxed at rates of up to 39.6%. In total, pass-through business earn over half of all US business income, according to the Tax Foundation, a think tank that generally supports low tax policies.
Such businesses are commonly run by high-income professionals, including lawyers, consultants, accounts and doctors. It's also a common structure used by real estate businesses and many investment firms, like hedge funds and private equity partnerships.
Under the new proposal, their profits would be taxed at just 15%, like all other business profits.
Just over 50% of all pass-through income goes to households making $693,000 or more — the top 1% of household income, according to figures calculated by the Tax Policy Center, a tax think tank run by the center-left Brookings Institution and the Urban Foundation. Just over two thirds of all pass-through income goes to the top 5% of income, households making $292,000 or more.
The proposal also includes many tax cuts and policy changes that conservatives have long supported and were included in Trump's campaign tax proposal: a full elimination of the estate tax, and scrapping the Alternative Minimum Tax. It also includes a tax credit for child care expenses, a proposal typically credited to the president's daughter, Ivanka Trump.
“This is going to be the biggest tax cut and the largest tax reform in the history of our country,” Mnuchin said at a conference Wednesday morning.