The Mysterious Missing Trillions In Donald Trump's Tax Plan

Nov 10, 2016
Originally published on November 11, 2016 12:46 pm
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Another big promise Donald Trump made during the campaign - cutting taxes. But there's some confusion over how much he wants to cut. NPR's Planet Money team is trying to nail down how a Trump presidency could affect the economy. Here's Robert Smith on the mysterious trillions that are missing in Trump's tax plan.

ROBERT SMITH, BYLINE: Back when nobody was taking Donald Trump seriously, a group called the Tax Foundation was. They're a nonpartisan tax analysis group, and they put economist Alan Cole on the case.

ALAN COLE: I got assigned to Donald Trump 408 days ago.

SMITH: At the time, Donald Trump was promising huge tax cuts for the rich, for the middle class, for corporations, for everyone. And Alan Cole's job was to add up how much of this tax cutting would cost the federal government. The final bill was stunning, probably the largest single tax cut of all time.

COLE: That number was $12 trillion.

SMITH: Did you re-check your math?

COLE: Oh, yeah. I looked at those - you know, I saw that number, and I thought, well, that's really, really big.

SMITH: In order to pay for a tax cut of $12 trillion over 10 years, the government would have to borrow a lot of money or slash government spending by 25 percent. So Cole published this number - big news story - and Trump tried to argue with it. Then he tried to ignore it. And finally...

COLE: After getting criticism on that, he started to consider new things, and throughout 2016, there were rumors and trial balloons of a smaller, more compact tax cut.

SMITH: You may be one of the few people in the world who has changed Donald Trump's mind on something.

COLE: I do think about that. But I think one thing about this is that on policy, he's perhaps more flexible than he gets credit for. And it's only when someone tells him something like his businesses are bad or his buildings are bad. Then, you know, he will be very adamantly defending himself.

SMITH: He gets super upset with that.

COLE: Yeah, I don't think he takes policy personally.

SMITH: So Donald Trump's team came up with a new tax plan. They trimmed the cuts - not as much of a gift for the wealthy. But this time they made it so that Alan Cole could not add it up and give one big, headline-grabbing number because Donald Trump started to say two contradictory things.

When he talked to small business groups, Trump said, oh, I'm going to cut the corporate tax rate not just for corporations but also for small businesses - for mom and pop places that file very simple tax returns. But when asked about this tax cut later by reporters, Trump's team was like, oh, no, we're not going to do that; what makes you think we're going to do that?

On the Planet Money podcast, we've been calling it Schrodinger's tax cut. It exists, and it doesn't exist at the very same time. Tax economist Alan Cole had to just throw up his hands and put out a range of what Trump's plan might cost.

COLE: Four to $6 trillion.

SMITH: Four to $6 trillion is a huge difference.

COLE: Absolutely.

SMITH: Eventually if Trump wants to change the tax code, the idea will have to go through Congress. Republicans control both houses, so they might be open to the bigger tax cut option, or they might want to go with a smaller plan. Eventually, though, someone will have to make a decision on Schrodinger's tax cut, pick one of the two options and put it down on paper.

COLE: Once things are written down in legislative text, you can't have that ambiguity anymore, and that's something that they're going to have to wrestle with.

SMITH: And then finally, economists can do the math. Robert Smith, NPR News, New York. Transcript provided by NPR, Copyright NPR.