The top economic surrogates for Donald Trump and Hillary Clinton both offered their own combative takes on their candidates’ respective tax plans Thursday, but they each left open substantive questions about how those plans would be implemented if their candidates become president.
For Trump’s plan, the unanswered question is this — how would the U.S. recoup revenues lost through his tax cuts if his expected regulatory, trade and energy reforms don’t come to fruition?
One of Clinton’s top unanswered questions is this — will she push for a reduction in the corporate tax rate if elected?
At a Thursday event hosted by the Tax Policy Center, Trump-allied economic experts Peter Navarro and Wilbur Ross said they view Trump’s proposal to decrease taxes for wealthy earners and businesses as part of a larger economic package. The plan also includes the renegotiation of trade agreements, regulatory relief and relying more on energy production.
The core elements of Trump’s tax plan include whittling down the number of income tax brackets, eliminating the estate tax, and nixing the carried interest loophole for investment managers. Ross said that all carried interest would likely be taxed at 33 percent under Trump’s plan.
Trump’s outline also includes a proposal to allow deductions of child care expenses. A TPC analysis of Trump’s plan released earlier this week stated that Trump’s plan would bring federal revenues down by $6.2 trillion over a 10-year period and raise the national debt by $7.2 trillion.
Trump’s campaign disputes that figure, and his analysts are relying on legislation in other areas to bolster the shortfall from the tax cuts. Congressional action on the elements of Trump’s total economic plan, as Navarro and Ross described it, would not be limited to tax issues.
Ross added that the Trump model has priced in the possibility of a tax cut going through, without approval of all their desired changes to trade, regulations and energy policy, based on projected growth. Their paper, using a concept known as dynamic scoring, estimates that tax revenues would increase by $2.4 trillion over 10 years if even some changes to these three key policy areas take place.
The possibility does exist, however, that Congress will not approve much of the reforms that Trump would seek — especially on trade. When asked about this, Ross said their paper’s model had taken this into account, but he didn’t go into detail. “The reason we applied such conservative assumptions to our numbers was to allow for the possibility of shortfall,” Ross said. “We have built in very, very considerable margin for error to cope with that possibility.”
Without providing a direct explanation of the economic situation if the tax cuts go into effect without contingencies, both experts simply emphasized the importance of trade policy changes as an offset. Their paper’s model estimates $1.7 trillion in revenues over 10 years if their trade proposals are implemented.
Sperling, an adviser to Clinton who spoke after Ross and Navarro, was noncommittal on the rate that the Democratic candidate believes would be most effective for corporate taxes. That question is one of the most pressing tax issues Congress will have to confront under the next presidential administration. Sperling hedged, saying Clinton is approaching the corporate rate question based on principle, rather than with a specific rate.
When asked if Clinton would consider lowering the rate as president, Sperling pointed to the difference between the marginal rate (35 percent) and effective corporate tax rate relative to other countries, where corporate rates are lower. “I think that’s a better way to approach this than coming in with a preexisting strategy on what your rate should be,” he said.