The introduction of President Trump’s tax plan has left many lawmakers, policy analysts and tax accounting experts with more questions than answers. There were no details on individual tax brackets, the tax rate at which overseas cash would be repatriated or how cutting the corporate tax rate won’t encourage more tax avoidance schemes, so there are few real numbers to crunch. “This was all ponies and no manure,” said Michael Graetz, a Columbia University tax law professor and a former Treasury Department official.
But now that Mr. Trump has revealed his hand, the obstacles he faces for a getting tax overhaul done this year are even more apparent.
Bipartisanship Is Even Less Likely
White House officials expressed tepid optimism that Democrats might get behind their tax plan for the good of the country. But there was no palpable support for anything that Mr. Trump’s economic team proposed. In fact, Democrats quickly took a page from the Republican Party’s playbook, accusing Mr. Trump of crippling the economy with debt. The difficulty of repealing the Affordable Care Act without the help of any Democrats is a good indicator that tax reform will be at least as challenging.
Republicans Aren’t Unified
Technically, Republicans do not need Democrats to sign on to their plan if they are willing to use the Senate’s budget reconciliation process to push the legislation through Congress. But they will need their own party to be united. Some deficit hawks appear ready to shed their feathers in the name of cutting taxes, spurring economic growth and giving Mr. Trump a victory. However, enough are likely to cling to their fiscal rectitude to cause a problem for the president.
Lobbyists Are Back on the Prowl
The White House killed the notion of the “border adjustment” tax by excluding it from its plan, a victory for retailers, oil companies and other importers who have railed against the idea of taxing imports. But with the Trump administration preparing to ax all individual deductions except for mortgage interest and charities, not everyone is happy. The National Association of Realtors has already expressed its displeasure with the doubling of the standard deduction, arguing that it waters down the tax benefits of owning a home. Other trade groups and special interests will find other parts of the tax plan to attack or support.
Helping the Rich, but the Rest?
As a candidate, President Trump suggested that rich people like him should actually pay more taxes. But nothing in his tax outline suggested that would be the case. The repeal of the estate tax and the alternative minimum tax and the extraordinarily low business tax rates suggest that the rich will do quite well under Mr. Trump’s plan. What is more, Mr. Trump’s advisers could not offer any insights into how middle-income Americans would fare under his plan. On Thursday, Treasury Secretary Steven Mnuchin was asked on ABC’s “Good Morning America” whether the middle class wouldn’t be paying more taxes. “I can’t make any guarantees,” he said.
Then There Are the President’s Taxes
Since Mr. Trump insists on breaking tradition and keeping his tax returns private, they become a potent issue. From what is known about Mr. Trump’s wealth and the bits of his tax information that have been made public, he would have quite a lot to gain from his proposal. The repeal of the estate tax and the alternative minimum tax would be a boon for Mr. Trump, as would a lower corporate tax rate and a territorial system that would let foreign profits go untaxed. As each detail of his plan becomes clearer, critics of Mr. Trump will muddy the policy debates by using his taxes as a rallying cry of opposition.