Tax plans of the presidential candidates: shockingly (Haha), Clinton and Trump proposals differ dramatically.

• Author: Levin-Epstein, Michael
• Position: Discussion

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This is not your typical presidential election season. So, as we prepare this issue of the magazine, tax issues are not on the front burner. Who knows what will happen during the debates or as the campaign heads inexorably toward Election Day? For this roundtable, we convened a group of senior tax policy professionals who follow tax matters and politics with a discerning eye: John Gimigliano, principal in charge of federal tax legislative and regulatory services at KPMG LLP; Nick Giordano, principal and director of U.S. tax policy for Ernst and Young LLP; Rohit Kumar, principal at PricewaterhouseCoopers LLP and co-leader of its tax policy services practice; and Jon Traub, managing principal of tax policy for Deloitte Tax LLP. Tax Executive Senior Editor Michael Levin-Epstein moderated the discussion immediately following the Republican and Democratic National Conventions.

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Michael Levin-Epstein: Let's start with Trump's tax plan.

Jon Traub: Donald Trump's plan is the fairly traditional broaden-the-base, lower-the-rate kind of plan we've seen from a number of Republicans in recent years. Although I think it's fair to say his plan features much more rate reduction than it does base-broadening, such that most nonpartisan estimates expect the plan as currently crafted would lose somewhere between $9 and $12 trillion over a decade, figures that are not likely to be embraced by Congress as we speak today. There are ongoing discussions about whether Mr. Trump might release a new plan, a revised plan, intended to bring down the bottom-line cost of his proposal. 1 do expect we will see that. When we will see it and what it will look like exactly, of course, remain up in the air.

John Gimigliano: I agree with Jon. I think we are likely to see changes in the Trump plan, maybe significant changes, at some point in the future, possibly reflecting a position closer to the House blueprint. One of the interesting things about the current Trump plan is that it costs trillions of dollars--from $10 to $12 trillion by some estimates--yet it really did not get the dramatic boost from the macroeconomic scoring you might have thought. Compare that with the House tax reform blueprint, where you had a significantly different macroeconomic score than the conventional score. At least, according to the Tax Foundation, you don't have a terribly significant difference between the conventional and macroeconomic revenue estimates, so I think that alone, to me anyway, suggests that we're likely to see substantial changes before Election Day.

Rohit Kumar: Just picking up on that, I was looking at the Tax Foundation numbers. The Tax Foundation's conventional estimate of the Trump plan is a $12 trillion revenue loss, and their dynamic estimate is $10 trillion. So it's a relatively small pickup relative to the order and magnitude of these changes--you're not getting big bang for your buck. For context, the federal government is anticipated to collect roughly $40 trillion over the next decade, so you're talking about a ballpark 25 percent reduction in anticipated federal revenues. Despite that, on the international business side, the plan departs from the Republican orthodoxy in that it doesn't shift to a territorial system but rather, in reducing the corporate rate to 15 percent, would apply it on a worldwide basis with no deferral. That is clearly a departure from where Republicans have been on that issue for any number of years, and even a departure from where Senator [Chuck] Schumer and Senator [Rob] Portman were in an international working group document they produced out of the Finance Committee where they, on a joint bipartisan basis, called for a shift to a territorial system with strong anti-base erosion measures. The cost of shifting to a territorial system is several hundred billion dollars, but in the context ofa$10or$12 trillion tax cut, you would think you ought to be able to find the revenue to shift to a territorial system as a part of the overall change in the system.

Traub: Couldn't you argue that his plan is more than a 25 percent reduction in revenues, since if you isolate only corporate, income, and estate taxes--the areas that get the most revision under his plan--they don't add up to $40 trillion, given the magnitude of payroll tax receipts? It's probably like a 35 or 40 percent reduction in the tax accounts he's actually moving around.

Kumar: That's probably true, right, because it doesn't include payroll. Payroll taxes are roughly 35 percent of what the federal government collects on an annual basis.

Nick Giordano: I just wanted to pick up, Rohit, on your point about the international side and how Trump's plan is out of step with the normal orthodoxy when you look at the taxation of foreign operations of U.S. companies. He's set forth a proposal more similar to what Senator Ron Wyden had been proposing, at least in the past, where you simply lower the rate as low as you can and go to a worldwide system where you're taxing the first...