Donald Trump’s tax reform plan would cut federal taxes by roughly a quarter over the next decade, according to a new analysis released Tuesday.
The Tax Foundation, a nonprofit think tank in Washington, released an analysis that found that the tax plan Trump released Monday would cut taxes by $11.98 trillion over the next 10 years by reducing individual and corporate taxes.
Trump’s plan also would boost economic output by roughly 11 percent over that time, and that faster economic growth would recoup some of the lost revenue for the government. In a “dynamic analysis” that takes into account the revenue feedback from that faster growth, Trump’s tax cut would only be $10.14 trillion.
The tax cut promised by Trump, a businessman and reality TV star who ranks first in the Washington Examiner‘s presidential power rankings, is nearly three times larger than that proposed by former Florida Gov. Jeb Bush, his rival for the GOP presidential nomination. In an earlier analysis, the Tax Foundation found that Bush’s tax plan would reduce revenues by $3.6 trillion.
Both candidates’ plans would reduce the top individual tax rate to 25 percent, and Trump’s would lower the business income tax rate to 15 percent.
The result would be higher wages for all workers, by an average of 10 percent to 20 percent, depending on whether the added economic growth is taken into account. The highest earners would see the proportionally biggest tax cuts, with the top 1 percent of earners seeing their income rise by 21 percent to 27 percent.
“Donald Trump’s tax plan would enact a number of tax reforms that would both lower marginal tax rates on workers and significantly reduce the cost of capital” said Tax Foundation economist Alan Cole. “These changes in the incentives to work and invest would increase the U.S. economy’s size in the long run, leading to higher incomes for taxpayers at all income levels.”
The Tax Foundation, which receives some funding from businesses and generally favors less taxation, maintains a tax model similar to one employed by Congress’ official tax scorekeepers that uses data from the Internal Revenue Service to gauge the effects of different changes in tax law.
When assessed by the model, Trump’s tax plan boosts the economy because it increases the incentives for people to work by cutting their individual taxes and increases the incentives for businesses to invest in new capital because it lowers the taxes on new investment and corporate profits.
