Who wins and loses in the GOP’s proposed tax overhaul

Read the Full Transcript

• JUDY WOODRUFF:

  The president launched a major campaign today to pass big tax cuts, and perhaps the most sweeping overhaul of the tax code in more than three decades.

  Many key details are not yet decided. Whether he can succeed is very much an open question.

  But the president and congressional leaders said today they have ambitious plans, which include cutting the corporate tax rate to 20 percent, reducing the number of individual tax brackets to just three, with rates — tax rates of 12 percent, 25 percent and 35 percent, and doubling the standard deduction for individuals and families.

  President Trump told supporters in Indianapolis the tax code is a relic that must be simpler.

• PRESIDENT DONALD TRUMP:

  Americans waste so much money, billions and billions of dollars, and many hours each year to comply with our ridiculously complex tax code.

  More than 90 percent of Americans use assistance to prepare their taxes. Under our framework, the vast majority of families will be able to file their taxes on a single sheet of paper.

• JUDY WOODRUFF:

  For more on what we know and what we don't know about the Republicans' tax proposal, we turn to Greg Ip, who writes on economic and financial matters for The Wall Street Journal.

  Greg, welcome back to the program.

  So, what is the core idea here? What are the president and Republicans trying to do?

• GREG IP, The Wall Street Journal:

  There are two core ideas in this proposal.

  The first one is lower corporate taxes, so that American businesses will have a higher incentive to invest. That raises economic growth and wages for everybody. And it makes the United States a more competitive place to locate head offices and businesses.

  Right now, the U.S. has the highest corporate tax rate in the developed world. After this reform, it would have one of the lowest. The second big piece is something that Donald Trump has been very emphatic about from the campaign trail and now. That is a big middle-class tax cut.

• JUDY WOODRUFF:

  So then who are the winners and the losers, based on the information they have provided so far?

• GREG IP:

  Well, right now, first of all, they haven't put out a fully, you know, detailed document, so it's impossible to say for sure.

  But we know that, right now, the business side is very much a winner. They see the corporate rate drop from 35 percent to 20 percent. They get to like write off the cost of all their new equipment right away, instead of taking several years to do it.

  We move to a so-called territorial system, which means that instead of taxing them on their profits no matter where they earn it, we only tax them on their American profits.

  On the individual side, it's a little harder to tell. There are some things that clearly are good for the middle class. For example, some of the tax rates are lowered. Instead of seven brackets, we have three. The standard deduction is doubled.

  On the other hand, there's a few things that are negative in there. For example, some itemized reductions are reduced or eliminated altogether, for example, for state and local taxes.

  And, finally, even though the president is framing this as a middle-class tax cut, there are provisions which clearly benefit the wealthiest the most, repeal of the estate tax and repeal of the Alternative Minimum Tax.

• JUDY WOODRUFF:

  So, I'm reading the cost of doing all this in the trillion — a few trillion dollars. How do they make up for that, or are they even going to try?

• GREG IP:

  So, one of the drawbacks in today's proposal is there aren't enough details to fully know how much it will cost.

  But some good estimates suggest that, over 10 years, it will be more than $2 trillion of additional borrowing. Now, we have already heard Republicans in Congress and the president basically say they're willing to borrow a lot of money to finance this tax cut, somewhat ironic, considering they spent eight years bashing Barack Obama and Democrats for the big rise in debts that they presided over.

  Now, there is a budget resolution in the works which will limit the debt impact to $1.5 trillion over 10 years. That still leaves a lot more so-called revenue raisers that they need to find.

• JUDY WOODRUFF:

  And just in a few seconds, political prospects better than for health care reform, which has been a problem for them?

• GREG IP:

  It's still tough. They will still have the same tensions within the Republican Caucus, for example, blue state Republicans who don't like taxes being raised on their taxpayers, deficit hawks who don't like the fact that this might add to the deficit.

  But there are some positives. First of all, because they are essentially paying for it by borrowing from future taxpayers, you're giving away to people, instead of taking away, as you were with health care.

  And perhaps most important, Trump was only peripherally involved and interested in health care. He was always leaving the details to Congress.

  Here, you have seen a unified effort and the president thus far fully engaged.

• JUDY WOODRUFF:

  Greg Ip of The Wall Street Journal, it's only beginning.

• GREG IP:

  It sure is.

• JUDY WOODRUFF:

  Thank you.

• GREG IP:

  Watch this space.