Assistant professor Michael Hayes, who teaches taxes and public budgets at Rutgers University in Camden
Trump’s plan matches his campaign promises, Hayes said. “The big tax cuts, especially on the corporate side, bringing the (top) corporate income tax rate down from 35 to 15 percent, that’s something they talked a lot about. And the standard deduction being raised,” which could reduce tax liabilities for tens of millions of families.
“But there’s going to be a lot of losers, as well as winners.”
[Click here to read reactions of local business and nonprofit leaders to President Trump's tax proposal.]
For homeowners and property taxpayers, Trump’s program means a trade-off: An end to the mortgage-interest deduction could reduce home values by driving up the actual cost of home mortgage payments – and that could cause “a decline in the demand for homes,” Hayes said.
Even if banking and construction interests manage to preserve the mortgage deduction, “it would be less valuable to a lot of middle-income households” if a higher standard deduction leaves them little or no benefit from mortgage tax deductions, Hayes added.
Throwing out tax exemptions for municipal bonds could boost costs for states and towns that borrow money to fund public projects and seasonal operations. And the proposed end to tax exemptions for state and local taxes “would have a big impact, especially in New Jersey and other states with high property taxes,” Hayes said.
On the other hand, “a lot of upper-middle-class families with children who own homes will benefit if the alternative-minimum tax is repealed,” as Republicans want, he said.
Overall, the proposals would “simplify” the tax code – which might itself bring resistance from accounting lobbyists. Trump has yet to propose “fine print” on plans to simplify tax brackets, from the current seven, to three, Hayes said. “We don’t yet know the income thresholds for those brackets yet. Some middle-class households might see their tax rates rise, depending on where the income threshholds are set.”
Gus Faucher, the Penn-trained economist and Radnor High School graduate who recently took over as chief economist at PNC Financial Services Group, the largest bank based in Pennsylvania
Even before President Trump announced his plans, economic surveys about attitudes have shown that a lot of people were optimistic that business would improve, "but there hasn’t been a lot of improvement in the hard data," such as business borrowing or investment. "It’s not bad, but it hasn’t been improving much,” he said.
Indeed, tax reform appears to have already been priced into the stock market – raising fears stocks will fall if Trump’s tax cuts don’t pass, he said.
Economist Adam Ozimek, at Moody’s Economy.com, in West Chester
The impact on small business remains unclear, with key details lacking, he said. “If the plan does include a significant cut to pass-through entities,” – a popular way to structure small businesses – “this risks people recharacterizing their income as business income to avoid paying taxes. Unless it is done extremely carefully it is likely to generate more tax avoidance than economic growth.” Ozimek said a review of Kansas’s failed attempt to grow through similar tax cuts is discouraging. He also said that there is no real proof that reducing the tax rate for the nation's wealthiest "will spur much economic growth."