The White House touted a Wall Street Journal editorial Thursday praising President Donald Trump's tax plan.
The American Farm Bureau Federation also put out a statement offering a mix of praise and caution. Zippy Duvall, president of the Farm Bureau, said farmers and ranchers need a tax code that "recognizes the unique financial challenges we face." The president's tax reform is a "pro-business approach," Duvall said, but tax reform "must treat all businesses fairy."
Duvall noted most farms and ranchers don't operate like large corporations. Farmers and ranchers "depend on deductions and provisions that give them the flexibility they need to keep their businesses running in all seasons," Duvall stated.
Duvall indicated that more clarity was needed about interest deductions, expensing, cash accounting and like-kind exchanges, for instance. Still, Farm Bureau was pleased the White House plan would eliminate the estate tax, which generated about $17.1 billion in federal tax revenue in 2015.
“Eliminating the estate tax will free farmers to invest in the future of their family businesses rather than selling off their land and legacy when a family member dies," Duvall said. "Farmers and ranchers have already benefitted from congressional action to reduce this burden, and we’re ready to bury the death tax once and for all."
The Wall Street Journal called the tax plan an example of "the supply-sided principles he campaigned on and is an ambitious and necessary economic course correction that would help restore broad-based economic prosperity."
The post-recession rebound of 2% economic growth has been poor had has led to more anxiety and diminished expectations, the Wall Street Journal stated. Faster growth of 3% is possible. "if anything close to this reform can survive the political maelstrom, it will go a long way toward returning to the abundance of the 1980s and 1990s."
A criticism of the tax breaks, coming from the New York Times and Washington Post, noted that the tax cuts would need to generate economic growth of 4.5% to effectively pay for themselves. The NYT quoted the Committee for Responsible Federal Budget, which states the budget deficit over the next decade could increase by $3 trillion to $7 trillion. https://www.nytimes.com/…
Treasury Secretary Steven Mnuchin disagreed with assessments that the tax reforms would lead to trillions of dollars of new debt in the coming decade. He did not have any details to support his analysis, but said, "The tax plan will pay for itself with economic growth."
The one-page explainer on the tax reform also did not indicate whether untaxed inheritance would also be able to claim stepped-up basis to reduce or eliminate capital gains on a sale.
The White House stated it was aiming for the biggest individual and business tax cut in American history.
For businesses, the White House plan calls for:
-A 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 (probably the vaguest of statements here, which is likely what Duvall was pointing to in Farm Bureau's statement.)
-Seven tax brackets with a highest rate of 39.6% would be reduced to three tax brackets for 10%, 25% and 35%. What is unclear is what the cutoff would be for the 25% bracket or 35% bracket.
-Doubling the standard deduction: now at $6,300 to $12,000. For most married couples that itemize their mortgage, real-estate and other taxes, doubling the standard deduction will likely wipe away the need to file a Schedule A.
-Providing tax relief for families with child and dependent care expenses. This helps out most young couples with kids.
-The White House also clarified concerns Thursday and stated that 401(k) retirement plans would not change.
The White House trumpeted these items as simplification:
-Eliminate targeted tax breaks that mainly benefit the wealthiest taxpayers.
-Protect the home ownership and charitable gift tax deductions, though this would help a narrower group of families if the White House can succeed in doubling the standard deduction.
-Repeal the Alternative Minimum Tax. Few people like the AMT, but the tax rate on President Donald Trump's 2005 taxes would have been 4% without the AMT, instead of 25%.
-Repeal the death tax. Farm groups such as the American Farm Bureau see the estate tax as hurting the ability of family farms to transfer the farm or ranch to the next generation. Family farms and small businesses are often the main focus of discussion to repeal the estate tax.
-Repeal the 3.8% Obamacare tax that hits small businesses and investment income.
The White House said the Trump administration will hold listening sessions with stakeholders to get their thoughts on the tax plan.
“Tax reform is long overdue,” National Economic Council Director Gary Cohn told reporters at the White House. "We have a once-in-a-generation opportunity to do something really big."
Chris Clayton can be reached at Chris.Clayton@dtn.com
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