Here are the lies both sides are telling you on Trump’s tax reform

Perhaps the most radical (don’t confuse “radical” with “bad” in this case) change Trump proposes is cutting the corporate income tax rate to 15 percent from the current 35 percent rate, one of the highest in the world.

Democrats will say that more corporate profits won’t create jobs. That’s not the case. According to analysis from the Tax Foundation, lowering the top corporate income tax rate to 15 percent would eventually create 824,000 jobs.

Republicans will claim that corporate tax cuts pay for themselves. As Treasury Secretary Steve Mnuchin said Wednesday, “This will pay for itself with growth and with reduction of different deductions and closing loopholes.”

To the contrary, Tax Foundation analysis showed that, even with the economic growth from the corporate tax cut, tax revenue would be down by almost $1 trillion over a decade. So all the other tax changes combined — repeal of the alternative minimum tax and the death tax, doubling of the standard deduction, elimination of most targeted tax breaks — plus their resulting economic growth, would have to generate $1 trillion in the next decade.

Is that likely? Probably not. If the administration really wants to pay for these tax cuts, they should propose some equally bold spending cuts.

Simplification

Taxes are certainly too complicated. By some estimates, Americans spend more than 6 billion hours a year complying with the tax code, costing them up to $378 billion.

The Trump administration is making a big to-do about trimming the number of tax brackets from seven to three. But the number of brackets is not what makes taxes complex. Reducing the number of brackets doesn’t reduce by one minute how much time you spend on your taxes, and it doesn’t in itself reduce the tax code’s distorting effects. What takes up Americans’ time is figuring out what deductions and credits they’re eligible for, and how to calculate them.

The Trump plan would simplify that by getting rid of many tax breaks that the administration says benefit the wealthiest taxpayers, though it would keep the mortgage and charitable deductions in place. Some of the tax breaks on the chopping block will get lots of opposition, even from Republicans. For example, some Republicans in states with high income taxes are already opposing the end of the state and local income tax deduction.

If the plan passes, it would probably simplify taxes a lot, but not so simple they could be filed on a postcard.

The Wealthy

Democrats are already blasting the plan as a tax cut for the wealthy. On one level they’re correct, but only because all cuts in income tax are for the wealthy. That’s because they already pay a huge portion of federal taxes. As of 2013, the highest 20 percent of earners paid 69 percent of all federal taxes. You could say 69 percent is more than their fair share because they earn 53 percent of all income.

Just because the tax reform plan is good for the wealthy doesn’t mean the tax cuts won’t help low-income earners. On the cut in the corporate tax rate to 15 percent, the Tax Foundation says the resulting economic growth would lead to about a 4 percent growth in after-tax income for low-income earners, the middle class, and the wealthy.

Other parts of the tax plan are actually worse for the wealthy than they are for the poor. For example, the elimination of the state and local taxes deduction. That will likely reduce after-tax income for the wealthiest 20 percent by 2.5 percent, while the lowest-income 20 percent would see their incomes fall by only 0.3 percent.

Then there’s a doubling of the standard deduction, which would be slightly good for low-income earners and the wealthy, but would be very good for the middle-class.

So who will be helped by the Trump tax plan? Most people, probably. But we won’t know for sure until the administration explains where the income cutoffs will be for the three tax brackets it proposes.

Jason Russell is the contributors editor for the Washington Examiner.