EDITORIAL: Tax overhaul plan is short on details

Sept. 30--President Trump says his tax plan makes everyone a winner.

Fewer low-income Americans will pay any federal income tax. Middle-class workers keep more of their hard-earned money. The top rate for the wealthy falls. Small businesses pay less. Big corporations get huge breaks.

What's the catch? It's apparently somewhere in the small print to be written later.

As the latest bid to repeal Obamacare fizzled in the Senate, Trump and Republican leaders rolled out the outline of a tax plan.

It now represents their best hope to gain a major legislative victory in the first year of the Trump presidency. Passing it also would fulfill a key Trump campaign promise.

Whether the proposal represents tax reform or is simply a big Republican tax cut remains to be seen. The immediate impression is that it's the latter, dropping the corporate income-tax rate from 35 percent to 20 percent. The top individual rate would slip from 39.6 percent to 35 percent. The plan would eliminate the alternative minimum tax, which applies to many wealthy individuals who otherwise might pay little or nothing in income taxes because of deductions and loopholes.

This is another reason why Trump must release his own tax returns -- to demonstrate how much he might personally benefit from his own proposals. Some observers think the changes would be very good for him, his family and his businesses.

Trump promised to help the middle class, and he could deliver by significantly raising the standard deduction. This step could remove millions of low-income Americans from the tax rolls and reduce the taxable incomes of other working families. But the net benefit for many in the middle class could be narrowed if they lose the personal exemption and some tax deductions, such as for medical expenses. Also, the lowest tax rate would rise from 10 percent to 12 percent. White House economic adviser Gary Cohn said he couldn't guarantee that some middle-class families wouldn't end up paying more.

Tax breaks for corporations are meant to "make America the jobs magnet of the world," the White House said. While favorable tax rates could boost economic activity, that could play out over many years and be hampered by slow growth in the U.S. labor market, compounded by immigration restrictions.

What happens to tax revenue in the meantime? This plan is likely to expand the deficit, although precise estimates are difficult because details are lacking. Nevertheless, a preliminary report from the fiscally conservative Committee for a Responsible Federal Budget said the cost to the treasury could come to $2.2 trillion over 10 years.

Deficit hawks on Capitol Hill could go after popular tax breaks, for individuals and corporations. Already, legions of lobbyists are working to save breaks favorable to various special interests.

Worries about the deficit also could trigger efforts to cut popular spending programs, including entitlements. Trump promised to protect Social Security and Medicare, but how will he weigh that promise against his promise to slash corporate taxes?

His drive to increase military budgets and border security doesn't leave much room to maneuver. It's not easy to spend more, tax less and reduce deficits at the same time -- as Ronald Reagan and George W. Bush learned.

Finally, is this Congress capable of taking on such a complex assignment, especially with such an unreliable partner in the White House? While there might be bipartisan support for some tax cuts, Democrats will resist some. Republicans might split on parts of the plan.

The normal legislative process would require many public hearings, a long debate and the opportunity to offer countless amendments. Trump doesn't have the patience to observe such formalities and will hound Republican leaders to move faster, just to get something passed. What's touted now as a major tax overhaul could end up as a tax cut for the rich.

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