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2017 Tax Reform: Many details still missing from Trump’s budget and tax reform goals

Customarily, in conjunction with the release of the President’s budget proposal, the Treasury Department issues a report known as the “Greenbook” that provides explanations of the tax policy proposals. This year, however, no Green Book was issued because President Trump’s tax plan lacked the requisite detail.

Background. For many years, when the President has issued a budget proposal, the Treasury Department has issued a report titled “General Explanations of the Administration’s Revenue Proposals” (the so-called Greenbook, for the color of its cover).

The Greenbook provides detailed explanations of the President’s tax policy proposals, including an explanation of current law, the reason for change, and when each proposal would go into effect. The Greenbook also provides revenue estimates of the proposals for the following decade.

On the Treasury website, such reports are provided back to fiscal year 1990.

Trump Administration—Tax Plan. In late April, Secretary Mnuchin and National Economic Council Director Gary Cohn announced the “core principles” of President Trump’s tax reform plan.

These principles include:

…a reduction in the business tax rate to 15%;
…a one-time repatriation tax on offshore earnings;
…a shift from a worldwide system of taxation to a territorial system;
…a reduction in the number of individual income tax rates, from seven to three (with brackets to be determined);
…doubling the standard deduction;
…eliminating the alternative minimum tax (AMT);
…repealing the 3.8% net investment income tax;
…repealing the estate tax; and
…repealing most “tax breaks,” while retaining certain provisions involving home ownership, charitable giving, and retirement savings.

Although the plan didn’t include any proposals for raising new revenue to offset that lost by the tax cuts, Secretary Mnuchin has said the cuts will pay for themselves by generating more economic growth.

Trump Administration—Budget Proposal. On May 23rd, President Trump released his budget proposal for the 2018 fiscal year. The budget would aim to cut approximately $3.6 trillion in government spending over the next decade. The budget, while relatively light on tax provisions as compared to those released in prior years, did provide for eligibility changes relating to the earned income tax credit and child tax credit. In addition to the budget, the Administration also released a separate document describing major savings and reform proposals in the budget, as well as a “blueprint” providing details on discretionary funding proposals. (See Weekly Alert ¶  7  05/25/2017 for more details.)

As reported by the Reuters, a number of politicians and experts have noted a number of issues with the projections in the Budget. One specific item relating to taxes is the estate tax—while the President’s tax reform plan called for repealing the estate tax, his budget assumes that the government will continue to receive “estate and gift taxes” through the 10-year window, and that the annual amount received will double over that time (e.g., from $21 billion in 2016 to $43 billion in 2027).

Many details still unknown. Secretary Mnuchin said that the budget proposal did not consider how new tax laws would impact government revenues and the deficit because the Administration did not have a detailed tax proposal. “When the president’s budget was done, we were not ready to have a full-blown tax reform plan,” Mnuchin said, adding that tax details would be worked out with Congress, then made public. A Treasury Department official said separately it would not help to publish details while talks with Congress were underway. “Releasing a Green Book of tax policy proposals as we work towards comprehensive tax reform would contradict that effort,” the Treasury official said in an email.

Senate Finance Committee Chairman Orrin Hatch (R-UT), in a statement before a Committee hearing on the Budget and tax reform policy options, described the President’s tax reform plan as a “framework,” and “one that I think can serve as an outline as this effort moves forward, keeping in mind that, as with any major undertaking, we’ll need to be realistic and commit to practicing the art of the doable.” Chairman Hatch has, however, pointed out a number of sticking points in the past, including the border adjustment tax heavily favored by House Republicans.

As things currently stand, tax reform is moving on a number of fronts, with the Administration having released its plan in April and House Republicans having released their plan (“A Better Way”; see Weekly Alert ¶  41  06/30/2016) last summer. Senate Republicans have also indicated that they were re-examining a number of proposals raised over the years, including those of former House Ways & Means Committee Chairman Dave Camp (see Weekly Alert ¶  1  03/06/2014, Weekly Alert ¶  20  03/06/2014, and Weekly Alert ¶  32  03/06/2014 for a series on Camp’s “Tax Reform Act of 2014”).

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