GOP tax plan
President Trump heads to Capitol Hill on Tuesday for a luncheon with Senate Republicans, and the main item on the menu will be tax cuts. House Republicans plan to unveil an ambitious tax plan in the next week or so, but Republican lawmakers are struggling to square the more than $5 trillion in tax cuts Trump has proposed with his pledged limitations — including his promise Monday that there will be not no changes to 401(k)s — and deficit limits. In order to pass the bill with just 50 Senate votes, Republicans can't exceed the $1.5 trillion deficit number they set in their Senate budget resolution, and senators worry Trump will continue to tie their hands with his statements.
Trump has also pledged to ax the estate tax, cut the corporate tax rate to 20 percent or lower, and focus the tax cuts on the middle class, and he opposes a fourth tax bracket for people who earn more than $1 million a year. To make the math work, Republicans will need to cut popular tax breaks, gradually lower taxes, or use accounting tricks, and limiting annual pre-tax 401(k) contributions to $2,400 from $18,000 would have allowed Republicans to borrow from future revenue. Politically, Trump and Republicans really want to sell this as a cut for the middle class, though the proposed cut in corporate taxes is projected to cost up to $2 trillion by itself.
"You are trying to stuff a $4 trillion or $5 trillion tax cut in a $1.5 trillion box," Steve Moore, one of President Trump's top 2016 economic advisers, tells The Washington Post. Still, he added optimistically, "there is a lot of desperation on the part of Republicans, and desperation is what will get us over the hump ultimately."