Last Thursday Donald Trump finally got round to tax reform. The main points in his plan are to double the standard deduction (tax-free allowance) to $12,000 for individuals and $24,000 for families, and to slash the number of personal tax brackets from seven to three.
The plans are far from detailed, however, says The Guardian’s Sabrina Siddiqui. Trump has made much of helping the middle classes, but some proposals, like scrapping the estate tax, suggest that “the wealthiest sliver of Americans could still reap tremendous benefits from the proposed changes”.
“It’s hard to predict the economic impact of these skeletal proposals,” agrees The New York Times. But they are likely to “raise the federal budget deficit by trillions of dollars”. Of course, Republicans “will surely argue that the cuts would spur growth, and, in some measure, pay for themselves”.
However, this is “supply-side hooey”, since in time the higher borrowing for unproductive tax cuts “could depress growth by driving up interest rates”. While there are policies that could justify driving up the deficit – repairing decrepit infrastructure, for instance – “making the rich richer is not one of them”.
Genuine tax reforms broaden the tax base, says the Financial Times, but “other than general talk” about scrapping deductions, there is scant evidence of that here, the paper notes. “It’s also sad to see that most of the biggest loopholes — mortgage interest, charitable contributions, the carried-interest exemption — go untouched.”