Donald Trump’s proposal to offer all businesses a flat 15 percent income-tax rate would prompt workers to try to cut their tax bills by turning themselves into “self-employed” contractors -- without leaving their current employer -- according to a tax-policy group’s report.
Trump, the Republican presidential nominee, has proposed a 15 percent tax rate on business income -- whether it’s generated by a multinational corporation, a mom-and-pop grocery or a private-equity fund.
Because it would offer such an advantageous tax rate, the proposal “would create a strong incentive for many wage earners to form” their own businesses and provide “labor services to their current employer,” said the report by the Washington-based Tax Policy Center. If half of those who earn more than $100,000 a year eventually made that change, federal revenue would drop by $894 billion over a decade, the center found.
A Trump campaign spokeswoman didn’t immediately respond to a request for comment.
The report, which was released Tuesday, was paired with an analysis of Hillary Clinton’s tax plan. In general, the twin reports found that under Clinton, the Democratic nominee, federal revenue would increase by $1.4 trillion over a decade, with the top 1 percent of earners paying roughly 90 percent of the increase. Trump’s plan, meanwhile, would decrease federal revenue by $6.2 trillion over that period, with the top 1 percent getting almost half the benefit.
‘More Different’
The two plans “really couldn’t be more different,” said Len Burman, the director of the tax-policy center.
Clinton’s campaign issued a statement saying her plan “would provide middle-class tax relief and pay for investments in good-paying jobs by requiring the wealthy, Wall Street and large corporations to pay their fair share.” It also said Trump’s campaign would “give as much tax relief to the top 1 percent as everyone else combined.”
Both candidates have made extensive revisions to their tax plans over the past six weeks, and tax policy remains one of the starkest differences between them. Clinton seeks various tax increases aimed at high earners, while Trump proposes a menu of individual and business tax cuts.
Pass-Through Rules