President Trump promised a “historic” tax reform in his address to Congress Tuesday night, pledging a lower tax rate for corporations but conspicuously advocating middle-class tax “relief” rather than individual rate reductions.
“My economic team is developing historic tax reform that will reduce the tax rate on our companies so they can compete and thrive anywhere and with anyone,” Trump said. “At the same time, we will provide massive tax relief for the middle class.”
Trump’s promise to extend middle-class tax relief is in line with recent statements from his newly-installed Treasury secretary, Steven Mnuchin.
But it could be interpreted as at odds with his campaign tax proposal, which called for the biggest tax cuts for high-income earners. According to one outside estimate, from the Tax Policy Center, a center-left Washington think tank, Trump’s campaign plan would have resulted in a tax cut of over $1 million, or about 9 percent, for the top 0.1 percent of earners, compared to a tax cut of just over $1,000, or 1.5 percent, for people in the middle fifth of earners.
Similarly, the tax reform plan proposed by House Republicans would cut taxes most for high earners, as a share of income. Both plans result in high-end tax cuts in large part because they reduce the top individual tax rates and capital gains taxes.
How the White House’s recent calls for middle-class tax cuts square with those facts is not yet clear.
Mnuchin has said, in interviews since taking office, that rate cuts for high earners should be offset by ending tax breaks — a policy others have called the “Mnuchin rule,” a term he has embraced. Yet he has not formally spelled out what exactly those guidelines mean.
