When Donald Trump made his widely ballyhooed economic policy speech to the Detroit Economic Club last week, people came away with the idea that he was endorsing the tax reform plan recently proposed by House Republicans.
But it turns out that he isn’t endorsing one of the plan’s major provisions — something that seems to have gone pretty much unnoticed.
When you ask the right question — as I did — you find out that there’s a 13-digit difference between Trump’s proposal and the one House Republicans unveiled in June.
We’re talking a difference of $1.2 trillion. Even by the standards of today’s big numbers and hyperbolic rhetoric, that’s serious money.
Let’s step back, and I’ll show you what I’m talking about.
One of the key revenue raisers in the Republican tax-cut plan is ending interest deductions on business loans that are taken out after the plan goes into effect (if it ever does). That would partially offset the huge tax cuts the plan proposes for businesses and individuals.
But ending the interest deductibility on new loans would devastate the value of commercial real estate — which is a major business for Trump.
Why would this plan hurt commercial real estate values? Because even though interest on existing commercial mortgages would continue to be tax deductible if the Republican plan became law, anyone buying commercial property after the plan went into effect wouldn’t be able to deduct interest payments on mortgages or other loans taken out to finance them.
This would greatly reduce the price most buyers would pay for commercial properties. That, in turn, would knock down the properties’ current values.
I couldn’t understand how Trump, immersed in commercial real estate, could possibly support such a proposal, no matter how much he and congressional Republicans wanted to show that they were on the same team.
So I sent an email to Hope Hicks of the Trump campaign asking what was going on. The answer, which I got from Larry Kudlow, economist, TV guy and an informal adviser to the Trump campaign, is that Trump doesn’t support that change.
That’s something Trump didn’t say during his speech and that, as best I can tell, no one from the media asked him about.
In a telephone conversation, Kudlow, whom I like and respect, told me that Trump was against ending the deductibility of interest for new business borrowings. In a subsequent email, Kudlow wrote that “as informal adviser, you can put me on record by name, saying that right now ending deduction for business interest is not popular with Trump campaign senior advisers.”
Neither Trump’s campaign nor the House Ways and Means Committee had a specific number for how much not allowing interest deductions on new business loans would benefit the Treasury, should the Republican plan become law.
However, an analysis by the Tax Foundation, a conservative think tank, says that ending deductibility for business borrowings would increase tax revenue by $1.2 trillion over 10 years. That’s trillion, with a T.
It follows logically, therefore, that not ending deductibility would blow a $1.2 trillion hole in the Republican proposal.
The Tax Foundation’s analysis says that the Republican plan would reduce federal tax revenue by $2.4 trillion over 10 years. If you add the $1.2 trillion provision that Trump doesn’t agree with, you’re increasing that shortfall by 50 percent. Serious money.
Sure, I know the political world has moved on since Trump’s Detroit speech. And I also know it’s unlikely that the Republican plan will become law.
But numbers are still numbers. Facts are still facts. And it’s important to pay some attention to them and get them right — especially in a presidential campaign as bizarre as this one has become.