Donald Trump, the polling frontrunner in the race for the Republican presidential nomination, staged a major policy announcement on Monday morning, laying out a tax reform plan he said would be a boon for the “middle- and lower-income classes”.
Trump’s plan would lower the top tax rate on individuals from 39.6% to 25% while capping taxes for “all businesses” at 15%. The plan calls for zero federal taxes on earners at the bottom of the income scale, defined as individuals making up to $25,000 a year or couples making twice that.
In an appearance at Trump Tower in Manhattan, the billionaire said his plan would eliminate federal taxes for 31 million households, providing “major tax relief” and “simplify[ing] the tax code”.
“It will grow the American economy at a level it has not seen for decades,” he said. “And all of this does not add to the US deficit.”
Trump added: “It eliminates the loopholes available to the very rich. In other words, it’s going to cost me a fortune, which is true.”
The plan calls for new revenue streams from capping individual deductions and imposing a one-time 10% tax on profits held overseas by US corporations – profits that have been estimated to amount to $2.1tn.
The plan also would close a lucrative loophole for hedge fund managers and other investment managers by raising taxes on fees such managers collect, known as carried interest.
“We’re lowering taxes, which Republicans love,” Trump said.
Among tax activists and experts, however, the plan met with mixed reaction.
Grover Norquist, who heads the influential conservative anti-tax group Americans for Tax Reform, endorsed it.
It doesn’t look remotely revenue-neutral to me unless it is in the very short run and unrealistic assumptions are made
Bruce Bartlett, former aide to Ronald Reagan
“This is pro-growth,” he told CBS News. “It is not a net tax increase, it will be a tax cut statically scored and it fits comfortably within the parameters.”
Alan Cole, a economist with the conservative Tax Foundation, said the plan was “a really big tax cut” and noted that while Trump would slightly raise tax on carried interest, “the much bigger story here is the reduction of the top individual tax bracket from 39.6% to 25%”.
Cole did note, though, that it was “very unlikely” Trump’s plan would prove revenue neutral.
Bruce Bartlett, a former aide to Ronald Reagan, described the plan as “basically, the [Jeb] Bush tax cut with a couple of items to make the rich pay a little more than they would under Bush”.
He added: “It doesn’t look remotely revenue-neutral to me unless it is in the very short run and unrealistic assumptions are made about the revenue gained from a one-time tax holiday on repatriated corporate profits.”
Dean Baker, a liberal economist with the Center for Economic Policy Research, told the Guardian: “It looks like a huge tax break for the rich.
“You’ve lowered the top rate from 43% to 25%, you ended the estate tax and you reduced the corporate income tax to 15%.”
Baker also said that given the elimination of many tax deductions, “this is almost certainly a huge increase for the middle class”.
Even the most populist provision of Trump’s tax plan, eliminating federal taxes for many low-income Americans, could prove problematic.
Rich Schmalbeck, a tax law expert at Duke University, told the Guardian that if such a provision eliminated the earned income tax credit, not mentioned in Trump’s plan, it could cost many low-income households thousands of dollars.
Answering questions from the press with typical brash assurance, the candidate trumpeted his own success in paying as little tax as possible.
“I’m the only one who’s honest about this,” he said, adding in a reference to 2012 Republican presidential candidate Mitt Romney, who was subject to intense scrutiny over his tax returns: “I listen to Romney.”
“I fight like hell to pay as little as possible,” he said. “Can I say that? I’m not a politician. It’s an expense! I have the best lawyers and accountants. I fight and I pay.”
Trump addressed reporters at a lectern in front of two American flags at the bottom of a set of escalators, which ground to a halt about five minutes before the event began. A noisy indoor waterfall also stopped running.
A small crowd of onlookers, seemingly a mix of Trump employees and shoppers in the tower lobby distracted by the spectacle, gathered to listen.
“I think you’ll see, we have an amazing code, it will be simple, it will be easy, it’s fair – it’s graduated,” Trump said. “I don’t think it’s supply side or anything else. I think it’s a common sense, well-thought-out tax proposal.”
The plan overlapped significantly with blueprints offered by other Republican candidates including Jeb Bush, who has also called for closing the loophole on carried interest, lowering taxes on corporations and lowering the top income tax bracket. Bush would also eliminate the estate tax.
Like Bush, Trump said he would not sign a pledge, supported by Americans for Tax Reform, not to raise any taxes on anyone.
Trump last presented a policy blueprint in mid-August, when he described a plan to build a wall on the US-Mexican border and to deport an estimated 11 million undocumented migrants.
He has spoken out in favor of different tax reform proposals over the years, although he has never before run for president or presented his tax ideas as a policy platform.
The anti-tax group Club for Growth made a million-dollar ad buy in Iowa earlier this month, in order to attack a proposal Trump made in writing in 2000 to impose a one-time, 14.5% tax on net worth for the richest Americans.
At the time, when in the prelude to the Iraq war the government was running a budget surplus, Trump said such a tax would create enough revenue to pay off the national debt.
Trump’s new plan contains no proposal so aggressive – or potentially unwelcome – to the Republican voters he is courting. Those voters are, by and large, working conservatives who find themselves under economic pressure.
On Monday, Tracey Cook and her mother, Linda, vacationing in New York from Jacksonville, Florida, stumbled on the Trump event when they stopped in the tower lobby to buy bumper stickers.
They ended up joining the crowd of Trump supporters gathered behind him as he spoke. Linda Cook held a sign reading “The silent majority stands with Trump”.
“That’s what it’s going to take to straighten this country out,” said Linda. “Business sense.”
We’re in trouble in this country. Americans should get back to work and be able to take care of ourselves
Tracey Cook, from Florida
“We’re really excited,” said Tracey. “I think he’s got the right business nose to make a difference. And we’re in trouble in this country. Americans should get back to work and be able to take care of ourselves.”
After the event the pair expanded their souvenir purchases to T-shirts with the Trump slogan: “Make America great again”.
Trump, meanwhile, called the 5.3% national unemployment rate “the biggest lie” – because, he said, it did not reflect workers who had fallen out of the economy and were no longer seeking employment.
Referring to polls in which his lead over another candidate with no experience in elected office has closed recently, he said: “People ask, why isDonald Trump doing well? Why is Ben Carson doing well?
“You know why they’re doing well? Because people are tired of political speak. One of the worst examples of it is the phony unemployment rate. There’s anger out there.”
Trump denied, however, that he was simply espousing populist policies.
“No, I’m not a populist,” he said, “No, I’m not. I’m a man with great common sense… I wouldn’t say populist at all. I’d say I’m a man with common sense.”