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Trump Speech Previews, Clouds CEA Tax Reform Estimate

Posted on October 12, 2017 by Luca Gattoni-Celli

President Trump stumped again for tax reform October 11, promising to boost the incomes of working families and American companies, but his account of the plan’s economic impact does not quite line up with summaries provided by the White House and its Council of Economic Advisers (CEA).

In a speech in Harrisburg, Pennsylvania, Trump said the CEA estimates that the proposal in the tax reform framework negotiated by the Republican “Big Six” for a deemed repatriation of foreign-deferred corporate earnings, “along with a lower tax rate, would likely give the typical American household a $4,000 pay raise. Could be a lot more than that, too.” But the context of the CEA’s $4,000 projection was not entirely clear.

A White House fact sheet tied to the speech said cutting the corporate statutory tax rate “to 20 percent . . . could boost wage growth for the median household to almost four times its current rate, according to analysis from Council of Economic Advisors.”

“This increase could provide $4,000 in additional income to the average American household, according to CEA analysis,” the fact sheet added, attributing the boost to the rate cut.

A senior White House official said during an October 10 call previewing the speech that one excerpt attributed the $4,000 estimate solely to the deemed repatriation provision.

However, a CEA spokesperson clarified to Tax Analysts that the CEA estimated a $4,000 annual wage increase in the long term for the typical American household stemming from all the corporate changes in the tax reform framework, not only from the deemed repatriation. A White House spokesperson later confirmed that qualification to Tax Analysts.

The CEA spokesperson also said the council hopes to release a white paper later the week of October 9 detailing that estimate and other projections of the framework’s economic effects. The senior White House official said to expect more information from the CEA shortly.

At an October 11 tax reform event sponsored by the RATE Coalition and The Hill, CEA Chair Kevin Hassett attributed stagnant domestic wage growth to several U.S. multinational corporations redomiciling overseas, saying that the GOP tax reform proposal would stimulate GDP and wage growth. He also said permanence in the context of tax reform is important.

Pedal to the Metal

Trump’s speech continued a White House barnstorming strategy to pressure Democratic senators facing reelection in 2018 in states Trump won to back tax reform. His audience included a large contingent of long-haul truck drivers — the target audience of Trump’s pitch, the White House official said on the October 10 call.

Senate Finance Committee member Robert P. Casey Jr., D-Pa., did not attend the speech, but issued an open letter to Trump ahead of it, urging him to discard the tax reform framework negotiated by the Republican “Big Six” and start over with Democrats to ensure that tax reform does not lose revenue or increase taxes on some middle-income households.

Trump thanked Republican lawmakers in attendance, including two House Ways and Means Committee members from Pennsylvania, Mike Kelly and Patrick Meehan. Trump did not mention Casey, but did acknowledge one of his 2018 challengers, Rep. Lou Barletta, R-Pa., who he said will “win big.”

The president appealed to members of the American Trucking Associations, promising tax reform as well as a trillion-dollar infrastructure package that he said would have a special focus on roadways and highways.

Although he attacked Democrats during the speech as obstructionist and claimed they wanted to raise taxes and had ignored the framework’s proposal for a larger standard deduction, Trump also distanced himself from Republicans as he struck a familiar populist tone, promising “America-first” tax cuts. “We’re going to fight and we’re going to get those Republicans, and maybe a few of those Democrats, to raise their hand” to support tax reform, Trump said, telling his audience they would “have so much money to spend in this wonderful country and this great economy.”

Trump also reframed the proposed individual marginal tax rates, saying the current bottom 10 percent rate would be cut to what he called a “zero bracket,” while the subsequent 15 percent rate would be cut to 12 percent. He also noted planned rates of 25 and 35 percent, but did not mention congressional taxwriting committees’ option to set an additional top rate.

Trump repeated his claim that tax reform would benefit middle-income households but not high earners, saying the wealthy do well when the economy and companies do well. He put the story of a family trucking business at the center of his argument for estate tax repeal.

Dylan F. Moroses contributed to this article.

Follow Luca Gattoni-Celli (@TheGattoniCelli) on Twitter for real-time updates.