Cohn Says Top Earners May See Higher Effective Rate in Tax Plan
(Bloomberg) -- National Economic Council Director Gary Cohn disputed the suggestion that the Trump administration’s proposed tax overhaul would benefit the wealthiest Americans on Friday -- and said it’s not clear the highest earners would get any tax cut at all.
Cohn, during a series of media interviews, repeated President Donald Trump’s message from earlier this week that tax legislation would ultimately benefit the middle class, rather than top earners. Their argument: After simplifying the tax code and eliminating deductions and other loopholes that are used to reduce taxable income, high earners would see their effective rates go up, even if their actual tax rate is reduced.
At the same time, Cohn called into question whether there’d be any rate cut for the highest earners. He said during an interview on Fox Business that a cut in the top individual income tax rate, which applies to individuals earning more than $418,400 a year, hasn’t been decided yet. (The one-page tax outline that Cohn and Treasury Secretary Steven Mnuchin released in April would have cut the top rate to 35 percent from 39.6 percent.)
“There may be a cut in the actual rate,” Cohn said during that interview. “We’re trying to broaden the base even for individuals, especially for top payers, and have you pay on a bigger percentage of your income.”
Tax-policy experts have said the dozen bullet points the White House released in April would undoubtedly mean lower taxes for the highest earners, while the impact on middle incomes was less clear. That plan also called for eliminating the Alternative Minimum Tax -- which raises the tax bills of certain taxpayers on the higher side of the income scale -- and repealing the estate tax, which applies to individuals with estates worth more than $5.49 million. However, it would also eliminate state and local tax deductions, which tend to benefit high-income filers in Democratic states.
And it would double the standard deduction, a potential boon for working-class taxpayers, who tend not to itemize their write-offs.
Since that April outline emerged, Cohn and Mnuchin have been meeting with congressional leaders to try to iron out an agreed-upon tax plan. That group, called the Big Six, released a statement of principles in July, but details remain scant. It’s unclear where individual income tax rates and brackets will be set -- or how deeply the plan would cut the corporate tax rate.
The White House said last month it would be leaving details of the legislation up to Congress’s tax writing committees, but Mnuchin this week said in media interviews that the administration will remain deeply involved in shaping the bill. The Big Six group -- which includes House Speaker Paul Ryan and Senate Majority Leader Mitch McConnell -- is scheduled to meet with Trump on Tuesday.
“In no way are we just turning this over to Congress,” Mnuchin told the Wall Street Journal in a story published Thursday. He also told CNBC that more details of a tax overhaul would be released “later this month,” an apparent reference to September, as part of a blueprint that would then go to the tax-writing committees in the House and Senate.
But Cohn on Friday didn’t commit to that timetable.
“We’re now working with House Ways and Means Committee and Senate Finance Committee to really finalize what that blueprint will look like,” Cohn said during a Bloomberg Television interview. “That’s going to get released in the next -- whatever -- weeks or months as those committees get together and finalize all of the details.”