Republican presidential nominee Donald Trump on August 8 said he would adopt House Republicans' tax reform proposal to shrink the number of individual income tax brackets from seven to three and would use their prescribed tax rates.
Trump also proposed making child care costs fully deductible and eliminating the carried interest deduction. His original tax plan called for placing a "reasonable cap" on the carried interest deduction.
In a prepared speech on the economy at the Detroit Economic Club, Trump pitched himself as the champion of change who will implement new tax and regulatory policies that would reinvigorate the national economy.
He said that if elected president, his policies "will present a night-and-day contrast to the job-killing, tax-raising, poverty-inducing Obama-Clinton agenda." He said a revised tax plan would be released in the coming days. His campaign website no longer lists the tax plan he proposed in September 2015.
Trump reiterated his intention to set a maximum 15 percent tax rate on both corporate and passthrough income, end "special interest loopholes" for wealthy individuals, and repeal the estate tax. He also repeated his support for a one-time 10 percent tax on repatriated corporate income and repeal of the Affordable Care Act.
Calling federal regulations a "hidden tax on American consumers and a massive lead weight on the American economy," Trump also said he intends to place a moratorium on all new executive agency regulations.
After Trump's speech, House Ways and Means Committee Chair Kevin Brady, R-Texas, said in a statement that they shared the same tax reform goals. Trump's support for the House Republicans' tax reform blueprint "makes me optimistic that we can work together to move our economy into the lead and improve the lives of Americans for the long term," Brady said.
Kyle Pomerleau of the Tax Foundation told Tax Analysts that while Trump's speech may have been light on policy details, his intention to use the House Republicans' streamlined individual income tax bracket proposal would reduce the cost of his tax plan. The foundation had estimated the 10-year cost of Trump's original tax plan to be more than $10 trillion after accounting for economic growth.
Trump's original tax plan called for four tax brackets of 0 percent, 10 percent, 20 percent, and 25 percent, and it claimed that 73 million households would not need to be pay any income tax at all. The House Republicans' blueprint proposed brackets of 12, 25, and 33 percent.
"One of the big drivers behind the cost of the original plan was the top 25 percent rate plus a very large zero bracket. If he is doing away with that, then that means it's going to cost less than his original plan," Pomerleau said.
Maya MacGuineas of the Committee for a Responsible Federal Budget said in an August 8 press release that it is encouraging that Trump is revising his tax plan. However, she cautioned that even though it would be an improvement over the original, it would still be far too costly.
"We urge Donald Trump to put forward a tax framework that will cost as little as possible -- or preferably generate net revenue -- along with a serious suite of new spending cuts and entitlement reforms that would not only pay for any remaining tax cuts but also put the national debt on a downward path relative to the economy," MacGuineas said.
Although Trump's proposal for a child care deduction lacked specifics, it is unlikely to come with a big price tag, and "the reason for that is not very many people are paying taxes under the Trump plan," Pomerleau said.
"It just sounds like he's designing [the deduction] as badly as possible," Chuck Marr of the Center on Budget and Policy Priorities told Tax Analysts. The deduction would need to have income limits, or preferably be turned into a tax credit, to prevent it from being simply a write-off for wealthy taxpayers, he said.
Marr also said Trump's proposed 15 percent tax rate for all business income would cause the same fiscal problems facing Kansas and provide wealthy taxpayers with an incentive to avoid taxes by changing corporate income into partnership or sole proprietorship income.
However, the RATE Coalition said in a statement that while it does not agree with all of Trump's economic agenda, it "heartily endorse[s] the goal of again making America's corporate rate competitive with the rest of the world."
Juanita Duggan of the National Federation of Independent Business also praised Trump's business tax proposal, saying in a statement that it would boost small business growth and "eliminate the disparity between the way large corporations and small businesses are treated under the code."