Republican presidential nominee Donald Trump on September 15, 2016, issued a tax reform-specific fact sheet (attached) providing additional detail beyond what he discussed in his speech to the Economic Club of New York. Trump continues to propose a statutory corporate income tax rate of 15%, but a Tax Foundation blog post on the revised plan said that it would not apply to pass-through businesses, and Politico reported the campaign as signaling that businesses would have to become corporations to qualify for the 15% rate. Trump had previously proposed a 15% business income tax rate within the personal income tax system for pass-through entities.

The fact sheet also said that most corporate tax expenditures would be eliminated under the plan, except for the research credit. It also reflected Trump's call for repeal of the estate tax but indicated that a step-up in basis would be disallowed for estates over $10 million: "The Trump plan will repeal the death tax, but capital gains held until death will be subject to tax, with the first $10 million tax-free as under current law to exempt small businesses and family farms. To prevent abuse, contributions of appreciated assets into a private charity established by the decedent or the decedent's relatives will be disallowed."

In his speech, Trump discussed new details of a "working and middle-class tax relief proposal" that he said will represent a $4.4 trillion tax cut, or $2.6 trillion under a dynamic growth model, down from a pre-revision cost of around $10 trillion. He proposed capping deductions at $100,000 for single filers and $200,000 for married filers and denying the deductibility of interest expense for manufacturers that may elect expensing.

"Firms engaged in manufacturing in the US may elect to expense capital investment and lose the deductibility of corporate interest expense," according to the fact sheet. It also stated: "An election once made can only be revoked within the first 3 years of election; if revoked, returns for prior years would need to be amended to show revised status. After 3 years, election is irrevocable." Trump previously announced his support for expensing during a revision of his tax plan announced on August 8, in a move seen as bringing his plan closer to the House Republican tax reform Blueprint released June 24. The Blueprint proposed expensing in conjunction with eliminating the deductibility of net interest expense.

He had also previously announced his endorsement of the Blueprint's proposed individual income tax rates of 12%, 25%, and 33%. Those rates were reflected in the fact sheet released today. The standard deduction would be $30,000 dollars for married couples and $15,000 dollars for single individuals, the fact sheet said. By comparison, the Blueprint proposes a standard deduction of $24,000 and $12,000, respectively, which it claims would reduce the number of itemizers from about one-third currently to approximately 5%.

The fact sheet repeats other previously announced elements of his tax plan, including a 15% corporate income tax rate and a 10% tax on repatriation, saying that "many larger businesses will want to repatriate trillions of dollars that they now keep abroad to avoid taxes." During his speech, Trump said that it is not hard to understand why companies will not bring profits back if they are subject to the full corporate tax rate. "I think it's going to be something that will be so phenomenal, far beyond what people even think," he said. "By taxing it at 10% instead of 35%, all of this money will come roaring back into our country and lots of good things will start to happen." The fact sheet does not indicate whether Trump continues to support repeal of deferred taxation of foreign earnings.

Trump used his speech to highlight the benefits of his proposals for working Americans and the middle class. "By lowering rates, streamlining deductions, and simplifying the process, we will add millions and millions of new jobs. In addition, because we have strongly capped deductions for the wealthy, and closed special interest loopholes, the tax relief will be concentrated on the working and middle class taxpayer … ," he said. His campaign said Trump's economic proposals create a total 25 million jobs over a decade, which equates to 200,000 new jobs per month.

Trade, Energy

On other issues, Trump repeated in his speech that he views China as a currency manipulator and that any country who manipulates currency will be met with tariffs. A broader economic fact sheet said Trump will ensure that trade agreements increase GDP growth, reduce our trade deficit, and strengthen the US manufacturing base. Also, "There will be no Trans-Pacific Partnership, even if the President and Congress are reckless enough to pass it in a lame duck session against the will of the American people."

On energy, the fact sheet said a Trump administration would "unleash an energy revolution" to bring new wealth to the United States: "We will support coal production. We will support safe hydraulic fracturing. We will allow energy production on federal lands in appropriate areas. We will also open up vast areas of our offshore energy resources for safe production." He also reiterated his support for infrastructure investment.

Child care

On September 13, Trump detailed his child care plan to allow working parents to deduct from their income taxes child care expenses for up to four children and elderly dependents, capped at the average cost of care for the state of residence. The deduction would be available to taxpayers who take the standard deduction as well as itemize deductions, but only those earning $250,000 per year or less for individuals and $500,000 for couples.

Additional child care spending rebates would be provided to lower-income taxpayers through the Earned Income Tax Credit. Trump also proposed creating Dependent Care Savings Accounts (DCSAs) that would allow both tax-deductible contributions and tax-free appreciation year-to-year; and guaranteeing six weeks of paid maternity leave by amending the existing unemployment insurance (UI) that companies must carry.

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ATTACHMENT

Fact sheet