Mnuchin: Trump has released plenty of financial info

Owen Stevens
April 27, 2017

Earlier this month, tens of thousands of people had marched in more than 150 cities across the country to demand Trump release his tax returns. Officials said they hoped to slash corporate taxes to 15 percent from 35 percent, but specifics are still to be negotiated. "That might help them offset any negative impact they would get potentially from losing their local or state taxes as a deduction", said Sean Stein Smith, an accounting professor at Rutgers University. It would whittle the number of tax brackets for individuals from seven to three, lower the top tax rate from 39.6 percent to 35 percent and double the standard amount taxpayers could deduct.

Earlier, Treasury Secretary Steve Mnuchin described Trump's tax plan as "the biggest tax cut" and the "largest tax reform" in the USA history.

From the details released so far, Maya MacGuineas, who heads the Committee for a Responsible Federal Budget (CRFB), said the plan could add $3 trillion to more than $5 trillion to the federal deficit over five years.

While lower taxes can lead to higher growth, there's also a "fiscal drag", said Daniel Shaviro, a tax professor at Columbia Law School. "All they can came up with was one page of platitudes".

The disappointment on the tax plan prompted fall in U.S. bond yields and the USA dollar.

The proposal also calls for doubling the standard deduction.

Doing so, in turn, could make the economy more efficient and accelerate growth and hiring.

Mnuchin said the objective is to make United States businesses the most competitive in the world.

AFP's Moore said the Congress needs to lower corporate taxes if America is ever to return to a sustained period of robust, economic growth.

After his 1981 tax cut, Reagan was forced to raise taxes several times. A lower corporate rate could make investment there more attractive, to the particular disadvantage of Canadian companies trading on worldwide exchanges. Now the top rate on such income is 39.6%, but Mr. Trump's proposal would cut it to 15%.

A significant tax cut for companies in the U.S. could accelerate this exodus, according to Liu Li-gang, the chief China economist at Citigroup in Hong Kong.

Many of these measures will benefit President Trump personally, particularly the abolition of the AMT.

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"It would tremendously help high earners", says Brian Thompson, a certified public accountant in Chicago. He had previously set up his own company, according to state media reports. As a result, he paid little state income tax despite earning almost $3 million a year. The Trump administration has proposed dropping the tax rate for these businesses from up to 39.6 percent to just 15 percent. That cost the state revenue without spurring more job creation.

Beijing is already anxious about a capital exodus following the US Federal Reserve's interest rate increases and a retreat by manufacturers to lower-cost countries in Asia and Africa. But many experts are skeptical.

How else would big businesses benefit?

But here's the thing: The White House has yet to specify how much of one's income would apply to each of the three rates that Trump is proposing. This is known as a "territorial" system.

A tax cut planned by US President Donald Trump will be a test for Beijing in managing its capital outflows and its troubled manufacturing sector. However, it did express broad support for switching to a so-called territorial tax system that would exempt company earnings overseas from taxation but would encourage companies to maintain their headquarters in the United States. Many businesses have kept hundreds of billions of dollars outside the United States. "Not a surprise that companies leave trillions of dollars offshore", he said. Some analysts counter that corporations might instead use the money to pay dividends to shareholders. But his ambitious plan is alarming lawmakers who worry it will balloon federal deficits.

US companies parked at least US$2.6 trillion in profits overseas in 2015, according to an estimate by the US Congress' Joint Committee on Taxation.

Trump says the plan accounts for revenue losses by eliminating deductions and loopholes for "the very rich", but his plan does not mention specifically what he plans to remove.

But the Trump team offered few details on which deductions would be dropped - a move that would likely spark ferocious opposition from the beneficiaries of those deductions.

"This will pay for itself with growth and with reduction of different deductions and closing loopholes", Mnuchin said, brushing aside assessments that the tax cuts would add to the cumulative US debt, not reduce it. Yet Cole forecasts that growth would increase only 0.4% annually.

Larry Kudlow, a CNBC senior contributor who served as an informal economic adviser to the Trump campaign, said, "The corporate stuff looks great to me".

"You can either have a small tax cut that's permanent or a large tax cut that is short-term". Eight years of subpar growth is enough.

Other reports by VgToday

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