Trump tax plan may cost $1.5 trillion more than he says

Over the last couple of months, he has released an overhaul that changes rates and includes newly announced child care deductions.

The reason for the range within each of the estimates produced by each individual model is confusion over whether and how Trump plans to tax “pass-through” business income under his plan.

The Republican presidential nominee’s new and improved tax plan, unveiled during an economic policy speech in NY last Thursday, would reduce federal revenue by between $4.4 trillion and $5.9 trillion on a static basis (meaning not accounting for macroeconomic effects), according to a new analysis from the Washington, D.C. -based conservative-leaning think tank the Tax Foundation. That’s still expensive, but it’s much less than the more than $10 trillion his original plan was estimated to cost.

But the new plan is out, as is a new analysis from the Tax Foundation.

Remember all that stuff about how Donald Trump’s tax plan treats pass-through income?

Election coverage for races from around the region and across the U.S. The pass-through structure is a mainstay of both small businesses and investment partnerships.

“Tax Foundation’s best understanding of the Trump proposal, after examining the totality of all statements made by the campaign, is that pass-throughs are not eligible for a single 15 percent tax rate on the individual income that their owners report; at best, they may be allowed to adopt some kind of tax status similar to that of C-corporations, either on a temporary or permanent basis”, the group wrote in its analysis.

That makes a huge difference when it comes to revenue.

The Trump campaign has not commented, forcing the Tax Foundation to issue two estimates. Under faster growth, the plan would cut revenue by $2.6 trillion to $3.9 trillion. His renovated proposal, however, does not specify, meaning the rate could wind up being as high as 33%, Trump’s highest proposed individual income rate. Now why am I focusing on the red ink from the plan rather than the economic growth it supposedly generates?

That day, Cole released an initial cost analysis for Trump’s latest plan of $4.4 trillion, before considering the effects of economic growth.

Economists disagree more about those so-called dynamic estimates and they’re more sensitive to assumptions about how the economy will respond to tax-policy changes.

The analysis also shows how a still-unresolved question about the plan’s treatment of business tax rates matters enormously for the federal debt and the fortunes of the very rich.

“It’s hard right now to say how much they’re trying to come up with a coherent proposal, as opposed to a politically palatable one”, he said.

Using $1.2 million as the average income for the top 1 percent, members of this group would get an average tax cut between $122,400 and $192,000, according to the Tax Foundation.

But people between the 80th and 100th percentiles would see higher after-tax incomes by 4.4 to 6.5 percent (on a static basis, again depending on how that pass-through rate ends up). The income increase for the top earners would decline to 10 percent. Nor does it account for the economic effects of any spending cuts or other measures that might be implemented to cure the deficit caused by Trump’s tax plan. He said last week that he thinks he could get the economy to grow by 3.5 percent or 4 percent per year. Depending on pass-through treatment, the Tax Foundation estimated that Trump’s new plan would add between 0.69 and 0.8 percentage points to US gross domestic product growth over the next decade, compared with 1.1 percentage points estimated for the first version of the plan.