President Donald Trump, announcing his plan for tax reform in Indianapolis Wednesday, praised Indiana’s tax climate and pledged to “deliver historic tax relief to the American people” in what he described as a “once in a generation opportunity."
He also seemed to threaten U.S. Sen. Joe Donnelly with tough campaigning in his 2018 Senate race unless the Democrat voted for the plan.
Trump and his allies are selling the plan as primarily benefiting the middle class, but there are also prime benefits for the wealthy included too. The plan, which will have to be approved by Congress and is seen as a starting negotiation point, repeals the estate tax and alternative minimum tax, lowers the corporate tax rate, and reduces the number of tax brackets while lowering the highest tax rate. One of the largest boons for the middle class would be that it doubles the standard deduction.
“I’ve been waiting for this for a long time,” Trump said. “We’re going to cut taxes for the middle class, make the tax code simple … and bring back the jobs and wealth that have left our country.”
He said Indiana is a “tremendous example” of a state that has “claimed a powerful competitive edge built on low taxes and less regulation.”
“It included electing a governor, who you may have heard of, who signed the largest income tax cut in the state’s history,” Trump said, referring to former Indiana governor and current Vice President Mike Pence, who he called a “terrific person.”
“It’s time for Washington to learn from the wisdom of Indiana,” Trump said.
Because of the Pence tax cuts, the state income tax is now 3.23 percent compared to the 3.4 percent rate in 2013. However, Pence pushed for larger cuts but was deterred by the Republican-controlled General Assembly. Pence also convinced lawmakers to repeal Indiana’s inheritance tax, which was already being phased out under previous Indiana Gov. Mitch Daniels. Pence also reduced corporate income taxes 1.6 percentage points over seven years.
Trump said he hoped Democrats supported his tax plan, and said of Donnelly, who traveled with him to the event, that if he doesn’t support the tax reform plan, “we will come here, we will campaign against him like you wouldn’t believe.”
After the event, Donnelly released a statement saying, “I work for Hoosiers, not President Trump or any political party."
"As it stands, the framework released today is missing many details that will be critical to determining whether working- and middle-class families truly stand to benefit," Donnelly said. "These Hoosiers will be foremost in my mind as I continue to engage with my colleagues in the Senate and also with the White House to try to craft a tax reform bill that will provide greater economic security to these families and also create and protect jobs here in Indiana.”
Under the nine-page plan, published Wednesday under the name “Unified Framework for Fixing Our Broken Tax Code,” the standard deduction would double to $24,000 for married taxpayers filing jointly and $12,000 for single filers.
The number of tax brackets would decrease from seven to three. The tax rate in the lowest bracket would increase from 10 percent to 12 percent, and the highest tax bracket rate would decrease from 39.6 percent to 35 percent.
The plan also would keep the mortgage interest and charitable giving deductions, while eliminating the state and local tax expenses deduction.
It also repeals the estate tax and the alternative minimum tax, which would largely benefit wealthy Americans.
However, Trump said he was not listening to the wealthy as he developed the tax code, which was authored in part by former Golden Sachs executives in his cabinet, Gary Cohn and Steve Mnuchin.
The wealthy “can call me all they want,” Trump said.
“I'm doing the right thing,” Trump said. “It's not good for me, believe me. What is good for me, not only as president and legacy, [is] if everythign takes off like a rocket ship. That's what i think is going to happen.”
The corporate tax rate would be reduced to 20 percent from 35 percent, and the maximum tax rate for small and family-owned businesses “conducted as sole proprietorships, partnerships and S corporations—so-called pass-through businesses—would be limited to 25 percent, instead of the individual rate of their owners.
The plan would seek to “end the perverse incentive to keep foreign profits offshore” by treating foreign earnings that have accumulated overseas.
Trump also talked about the importance of bringing back jobs and wealth from overseas to the United States — and appeared to call out Carrier Corp. He made a deal with Carrier late last year which he said would keep manufacturing jobs here in the state, but the company still carried out with plans to lay off several hundred people.
“Some [companies] made great promises to me but those promises are only being partially met,” Trump said.
Several Indiana Democrats canned Trump’s remarks. Democrats in general have been trying to make the case that Trump’s proposed tax cuts benefit the wealthiest Americans.
Democratic Rep. Andre Carson, tweeted Trump’s “Trick Down Tax Plan is somewhere between indefensible and obscene.”
Indiana House Minority Leader Scott Pelath minimized the Pence-era tax cuts, tweeting they amounted to “less than $50 per taxpayer while teachers were getting laid-off.”
But Republicans and conservative groups offered glowing reviews.
U.S. Sen. Todd Young said in a statement that “President Trump made a convincing case today that this tax reform package will boost the economy and increase the take-home pay of every Hoosier.”
Indiana Chamber of Commerce President Kevin Bringer said in a statement that “the Indiana Chamber is advocating for a plan that will accelerate economic growth and expand jobs, and allow the U.S. to be more competitive with other countries.”
"We believe President Trump’s tax proposal will do just that,” Bringer said. "In addition to making things simpler and fairer for taxpayers, the President’s plan is projected to be revenue-neutral after the first few years – due to the enhanced economic growth that’s expected.”
Indiana House Speaker Brian Bosma said Indiana was a model worth following.
“With one of the top business climates in the nation, Indiana’s economic environment stands in stark contrast to the dysfunction of federal tax policy and job-killing regulations,” Bosma said in a statement. "We’ve worked hard to pass conservative, commonsense policies, which have led to lower taxes and less regulations on Hoosiers and businesses alike."