President Donald Trump speaks about tax reform at the Andeavor Mandan Refinery in Mandan, N.D. (Charlie Neibergall/AP)
A new study imagined a fantasy universe where essentially all the tax breaks for corporations and individuals were stricken starting next year, to see how low taxes could go. The lowest corporate tax rates could dive would be 26 percent, according to the analysis by the nonpartisan Urban-Brookings Tax Policy Center. That’s much higher than the 15 percent rate President Trump has proposed, but lower than the current rate of 35 percent.
The study also found that if the goal was to prevent the new tax rates from hitting the poor and middle class, there would need to be a zero tax bracket and the highest individual tax rate would be capped just under 30 percent — lower than current law.
“To me, this exercise introduces a note of realism in how low income tax rates can go,” said Mark Mazur, director of the Tax Policy Center.
The study was a highly theoretical exercise, making the assumption that it would be possible, in one sweeping blow, to get rid of essentially all the deductions, tax credits and exclusions that are woven into the complex American tax code.
That puts a sort of boundary on what to expect out of tax reform — the lowest rates could possibly go if the goal is to remain revenue neutral.
But it is also extremely unlikely to happen as modeled; politicians have talked about changing or limiting specific tax breaks, not a wholesale elimination of every policy in the code.
Tax Policy Center analysts used three scenarios but stuck to a lowest corporate tax rate of about 26 percent.
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