GOP So Far Failing to Keep Three “Tax Reform” Promises

President Trump and House Speaker Paul Ryan have both signaled that tax reform is their next top legislative priority. Any tax bill should keep three promises that they and other key Republican leaders have made:

(1) No absolute tax cuts for the “upper class.” In an interview shortly after his nomination, Treasury Secretary Steven Mnuchin stated:

Any reductions we have in upper-income taxes will be offset by less deductions, so there will be no absolute tax cut for the upper class.  There will be a big tax cut for the middle class, but any tax cuts we have for the upper class will be offset by less deductions that pay for it.

Mnuchin later suggested that the rule shouldn’t apply to the House GOP’s health bill (which, as we explained, was inappropriate because it included major tax changes), but he reiterated that it should apply to a tax package.  Now, as they address tax reform, the President and Congress should hew to that standard.

(2) A focus on workers and families.  President Trump promised in his inaugural address that his “every decision” on taxes would “be made to benefit American workers and American families.” Any tax reform should focus on improving the incomes of working and middle-income Americans.  Tax reform that does more to boost the incomes of the very wealthy than of low- and moderate-income families won’t meet that standard.

(3) Revenue neutrality. Speaker Ryan has been clear that he wants tax reform to be “revenue neutral.” In a recent interview with Judy Woodruff, he said:

Woodruff: Will the individual and the corporate tax cuts that you’re interested in the House passing…be revenue-neutral or will they require offsets?
Ryan: [W]e’re planning revenue-neutral tax reform, which means you have to take away loopholes and special interest deductions if you’re going to lower tax rates. That’s clearly what we’re working on doing. That’s what the House blueprint that we ran on does do. It does affect both what we call the individual side of the tax code and the business side of the tax code. And we propose it on a revenue-neutral basis….
Woodruff: So, no domestic spending cuts? I ask because a Republican Study Group last year was talking about $7.5 trillion in spending cuts for 10 years.
Ryan: That’s to balance the budget. That’s not to pay for tax reform.     

Declaring that a tax package will rely on closing tax loopholes and not on cutting domestic programs to pay for tax cuts is a critical promise, but his tax blueprint would fall trillions of dollars short of revenue neutrality.

Despite these pledges, Trump’s campaign tax proposal and Ryan’s tax reform blueprint fail each of these standards: they’d deliver huge net tax cuts to millionaires, boost the incomes of the very wealthy far more than for low- and moderate-income households, and increase deficits by trillions. (See table.)