Analysis: Trump's new tax plan would cost trillions

Analysis: Trump's new tax plan would cost trillions
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Republican presidential nominee Donald TrumpDonald John TrumpTrump mocks wind power: 'When the wind doesn't blow, just turn off the television' Pentagon investigator probing whether acting chief boosted former employer Boeing Trump blasts McCain, bemoans not getting 'thank you' for funeral MORE's latest plan to cut corporate and individual tax rates would cost the government trillions in tax revenue, the conservative-leaning Tax Foundation said in a report released Monday.

Exactly how much the plan would reduce tax coffers is unclear, because the group said it is uncertain how certain business income would be taxed under Trump's proposal, which would reduce the top individual tax rate from 39.6 percent to 33 percent and the corporate rate from 35 percent to 15 percent. 

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The Tax Foundation estimated that the plan would lower federal revenue by between $4.4 trillion and $5.9 trillion over 10 years using "static" scoring, which does not consider macroeconomic effects. It would cost between $2.6 trillion and $3.9 trillion using "dynamic" scoring that factors in economic effects.

Trump's plan does not clearly specify what the tax rate would be for income from "pass-through" businesses, which the Tax Foundation said made offering more specific calculations difficult.

Pass-through businesses' earnings are currently taxed through the individual tax code rather than the corporate tax code.

Trump's website says his plan “will lower the business tax rate from 35 percent to 15 percent, and eliminate the corporate alternative minimum tax. This rate is available to all businesses, both big and small, that want to retain the profits within the business."

Trump's revised plan would cost $4.4 trillion on a static basis and $2.6 trillion on a dynamic basis if pass-through business income is taxed at rates of up to 33 percent.

It would cost $5.9 trillion on a static basis and $3.9 trillion on a dynamic basis if pass-through business income is taxed at a rate of 15 percent, according to the Tax Foundation.

The Tax Foundation estimates that Trump's plan would grow gross domestic product (GDP) by 6.9 percent if pass-through business income is taxed at rates of up to 33 percent and by 8.2 percent if it is taxed at a 15 percent rate. The plan would lead to 1.8 times more full-time jobs under the higher-rate assumption and 2.2 times more full-time jobs under the lower-rate assumption. 

"The larger economy and higher wages are due chiefly to the significantly lower cost of capital under the proposal, which is due to the lower corporate income tax rate and expensing for those firms that choose to adopt it instead of deducting interest," the group said.

The plan would raise the after-tax incomes of people in every group, with those in the top 1 percent seeing the biggest increase, according to the Tax Foundation.

The tax proposal Trump released Thursday has higher individual tax rates and a broader individual income tax base than the plan Trump released last year. As a result, the Tax Foundation estimated that Trump's revised plan costs less than his original plan, which was predicted to cost $12.3 trillion under static scoring.

Trump's original plan would have increased people's average after-tax incomes by 9.2 percent on a static basis, and his latest plan would only increase average after-tax incomes by 3.1 percent to 4.3 percent.

While most income groups would get less of a tax cut under the new plan, those in the bottom 20 percent of income would get more of a benefit under the new plan because it includes a refundable tax credit for child care, the Tax Foundation said.