Trump’s proposed tax cut would create far, far greater incentive to game things than Brownback’s ever did. Kansans who turned themselves into businesses were spared from a 5 percent top personal income tax rate in the state. In Trump’s proposal, a well-paid professional or company owner could potentially shave 20 percentage points from their taxes by claiming their salary as a business profit. The Tax Policy Center thinks such shifting could cost Washington about $650 billion over a decade; in total, by their account, the special pass-through rate would cost $1.5 trillion.
Brownback cooked up Kansas’ tax cuts with the help of anti-tax hacks like Club for Growth founder Stephen Moore and Art Laffer, who still insist against all available evidence that they will be a success. But even some supply-side–friendly conservatives have criticized the policy. The Tax Foundation, for instance, warned Kansas legislators against the tax cuts and later said that the fallout from them was “doing damage to the state tax reform conversation nationally.”
For fun, I called up Alan Cole, one of the Tax Foundation’s staff economists, to see what he thought about the new Trump proposal. He was not especially upbeat.
“Pass-through taxes are decently well-structured as they are, and it’s probably best to leave them alone,” Cole said. He told me that, according to the foundation’s model, it would add about 0.12 percent to the country’s annual growth rate, but again, at a cost of about $1.5 trillion. “As far as tax reform trades go, really? Is this the one that you want?”
Apparently so, if you’re Donald Trump.