President Donald Trump will propose the largest tax cut in the country’s history as a way to spark sustained 3% economic growth, U.S. Treasury Secretary Steven Mnuchin said Wednesday.

Here is the full text of the tax-reform principles.

Goals for Tax Reform

  • Grow the economy and create millions of jobs
  • Simplify our burdensome tax code
  • Provide tax relief to American families—especially middle-income families
  • Lower the business tax rate from one of the highest in the world to one of the lowest

Individual Reform

  • Tax relief for American families, especially middle-income families:
  • Reducing the 7 tax brackets to 3 tax brackets of 10%, 25% and 35%
  • Doubling the standard deduction
  • Providing tax relief for families with child and dependent care expenses

Simplification

  • Eliminate targeted tax breaks that mainly benefit the wealthiest taxpayers
  • Protect the home ownership and charitable gift tax deductions
  • Repeal the Alternative Minimum Tax
  • Repeal the death tax
  • Repeal the 3.8% Obamacare tax that hits small businesses and investment income

Business Reform

  • 15% business tax rate
  • Territorial tax system to level the playing field for American companies
  • One-time tax on trillions of dollars held overseas
  • Eliminate tax breaks for special interests


Deep Cuts and Loose Ends

The Wall Street Journal reports Trump Calls for Deep Cuts in Business Taxes, Changes for Individuals but many loose ends remain.

The plan largely hews to tax-cut proposals Mr. Trump made during his presidential campaign last year, but it includes several crucial changes. Most notably, Mr. Trump is proposing to repeal a provision of the tax code that allows individuals to deduct the state and local taxes they pay from their reportable income. That will hurt residents of high-tax states such as New York, New Jersey and California and spur objections from some Republican lawmakers in those states.

The corporate tax rate would drop to 15% from 35%, and U.S. companies would owe little or no U.S. tax on their future foreign profits. The tax rate on business income reported on individual returns would also drop to 15% instead of being taxed at individual tax rates.

Mr. Trump’s plan leaves several crucial issues unresolved, including whether companies could immediately write off capital expenses, where to set the one-time tax rate on U.S. companies’ stockpiled foreign earnings, how a break for child care would be structured and where the tax brackets for individuals would be set.

Mr. Mnuchin said the tax cut would be the biggest ever. Asked how he measured that, he pointed to the size of the rate cut for corporations from 35% to 15%.

Democrats said the plan appeared heavily tilted toward high-income households. They pointed to lower rates on individuals, the 15% rate for pass-through businesses and estate-tax repeal as significant benefits for some the wealthiest taxpayers.

Senate Democratic leader Chuck Schumer of New York said the proposal to cut tax rates for pass-through businesses would just benefit high-income people like the president himself.

Most U.S. businesses are pass-throughs, called that because their income and deductions pass through to their owners’ individual returns. That group includes many small firms, but also large global law firms, hedge funds and the GOP president’s own real estate and branding businesses. These businesses don’t pay the corporate tax rate.

Reform or Tinkering Around the Edges

If the proposal passes as is, I will benefit via lowering of taxes on pass-through income. So will many small businesses.

I would have proposed something completely different. I had been meaning to write it up and will do so soon.

Mike “Mish” Shedlock