New Tax Plan released by Trump Admin

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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 of the wealthiest taxpayers.

Sen. Chuck Schumer of New York, the chamber’s Democratic leader, 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 president’s own real estate and branding businesses. These businesses don’t pay the corporate tax rate.

Cutting their rates without opening loopholes could require very complex rules and lead to situations where law firm partners receiving profits pay lower tax rates than their junior attorneys do.

“The very wealthy are doing pretty well in America,” Mr. Schumer said on the Senate floor on Wednesday. “God bless them. Let them do well. They don’t need another huge tax break.”

Mr. Cohn said the goal of the plan isn’t to deliver tax cuts to upper-income households. “What we’re doing is we’re just broadening the base of taxable income,” he said. “Their effective rate is what you have to look at.”

But he said the administration didn’t have a particular target yet for how that would be measured.

Among the biggest changes is the repeal of the state and local tax deduction; the effect of that would be to shift the tax burden from low-tax states such as Texas and Florida to high-tax states such as New York and New Jersey. Eliminating the deduction could raise more than $1 trillion over a decade, and it brings Mr. Trump’s plan closer to a plan advanced in the House.

“It’s not the federal government’s job to be subsidizing the states,” Mr. Mnuchin said. “We’re not looking to necessarily raise taxes on the top 1% but we want to get the federal government out of the business of what’s the state’s business.”

Democratic objections will force Republicans to find near-unanimity in their own ranks as they struggle with trade-offs.

“We’re in agreement on 80%, and then that 20%, we’re in the same ballpark,” House Speaker Paul Ryan (R., Wis.) said.

Mr. Mnuchin said the administration’s proposal won’t endorse the border-adjustment feature that is central to the House GOP plan. The provision attempts to raise revenue by taxing imports, but not exports. Mr. Mnuchin said the administration wasn’t opposed to the provision in concept, and that he liked aspects of it. But he said: “We don’t think it works in its current form.”

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