Ross also addressed another potential complication in Trump’s plan -- that the 15 percent rate for pass-through businesses might prompt workers to turn themselves into “self-employed” contractors without leaving their current employer in order to get the lower rate. Trump doesn’t intend to allow that to happen, he said.
Moderator David Wessel, the director of the Hutchins Center on Fiscal and Monetary Policy, asked whether new regulations and enforcement would be needed to prevent people from trying that strategy.
“If all the people in Washington, all the lawyers and tax professors can’t figure out how to draft something, they ought to quit,” Ross said.
The Tax Policy Center, which is a joint venture of the Urban Institute and the Brookings Institution, this week released updated analyses of both candidates’ tax plans. It found that Clinton’s plan, which proposes various tax increases on high-earning individuals and some businesses, would raise about $1.4 trillion over 10 years. Trump’s plan, which proposes tax cuts for businesses and individuals, would decrease federal revenue by $6.2 trillion over that period.
Navarro, an economics professor at the University of California Irvine who is advising Trump’s campaign, criticized the center’s analyses because it didn’t account for the effects of changes in economic behavior that would result from the proposed policy changes. That approach, called “dynamic scoring,” is controversial among economists, who disagree on how to build economic modeling for it.
‘Politics, Politics’
“Politics, politics, politics,” said Navarro, who called the tax-policy center “a left-leaning center that produces analyses that favor Democratic taxes and programs.”
Len Burman, the tax-policy group’s director, said it plans to release studies that will consider such “macro-economic effects within the next few days.”
Another study, by the conservative Tax Foundation, used dynamic scoring to determine that Trump’s tax proposals would reduce federal revenue by $2.6 trillion to $3.9 trillion over a decade, even after generating as many as 1.8 million new jobs. The Tax Foundation also found that, on a dynamic basis, Clinton’s plan would increase federal revenue by $663 billion over 10 years, though it would lead to 697,000 fewer jobs in the long run.
Sperling said the Tax Foundation’s model of Trump’s plan was too generous, resulting in a finding that “allows people to think they can drink chocolate malts and lose weight at the same time.” A more responsible approach to dynamic scoring “might affect 5, 10, 15 percent” of the plan’s static cost, he said.