Republican presidential nominee Donald Trump speaks at a Remembrance Project luncheon in Houston on Sept. 17. The Remembrance Project is a support group for families of those killed by people in the country illegally. (Mandel Ngan/ Agence France-Presse via Getty Images)

The first independent analysis of Donald Trump's revamped tax plan is finally out, and it confirms what appeared to be true when the Republican presidential nominee gave his big tax speech last week: Trump's "yuge" tax cuts have shrunk dramatically, particularly for the middle class, and they now skew even more to helping the highest-earning Americans.

Very low-income families would see more benefits under the revised plan, the Tax Foundation said in its analysis, thanks to Trump's recently announced child-care tax credit. But those families would still see relatively small income increases compared with the nation's top earners.

The Tax Foundation projected the plan would increase economic growth and result in the creation of an additional 1.8 million to 2.2 million jobs over the next decade, a reflection of how much Trump has scaled back his tax-cutting ambitions. His original plan, released in 2015, would have led to 5.3 million new jobs, the same group estimated last year.

Those projections either contradict or call into question several of Trump's claims last week in a speech in New York, when he rolled out the plan.

Trump told the New York Economic Club that his full economic plan, including regulatory, trade and energy reform, would create an addition 18 million jobs over the next decade. That leaves 16 million jobs to be created by the nontax provisions of his plan, a number that many economists view skeptically. The Tax Foundation did not estimate the effects of Trump's energy, trade or regulatory proposals.

More concretely, Trump bragged that the plan would deliver large benefits for middle-income taxpayers and that, "by contrast, someone earning $5 million will receive virtually no change in their tax bill at all."

While such effects are theoretically possible for a very particular taxpayer at that income level, the Tax Foundation analysis predicts that the typical $5 million earner would see her or his tax bill fall by as much as $800,000 under Trump's plan.

The analysis also shows how a still-unresolved question about the plan's treatment of business tax rates matters enormously for the federal debt and the fortunes of the very rich.

It appears to be a direct trade-off. If Trump allows all businesses — including what are called pass-through entities, a group that includes many small businesses but also the bulk of Trump's companies — to pay a 15 percent tax rate, then the plan would increase the debt by as much as $5.9 trillion over the next decade, not accounting for additional economic growth. Also, the top 1 percent of taxpayers would see their incomes rise by 16 percent.

If the low business rate applies only to traditional corporations, then the plan's projected cost would drop to a maximum of $4.4 trillion over 10 years, a $1.5 trillion difference. The income increase for the top earners would decline to 10 percent.


The Tax Foundation also estimated how much additional economic growth the cuts would generate, using a model that tends to predict higher gains from tax cuts than many other models used by think tanks in Washington. Those effects are smaller than those for the previous version of the plan. Depending on pass-through treatment, the Tax Foundation estimated that Trump's new plan would add between 0.69 and 0.8 percentage points to U.S. gross domestic product growth over the next decade, compared with 1.1 percentage points estimated for the first version of the plan.

That plan was also much more expensive: It would have added at least $10 trillion to the debt over a decade, even after factoring in added growth, the Tax Foundation estimated.

The group appeared set to release its analysis last week soon after Trump's speech, but questions over pass-through treatment appeared to bedevil its analysts for days. Finally, they decided to present two possible interpretations of the plan, with different numbers for each.

"Tax Foundation’s best understanding of the Trump proposal, after examining the totality of all statements made by the campaign, is that pass-throughs are not eligible for a single 15 percent tax rate on the individual income that their owners report; at best, they may be allowed to adopt some kind of tax status similar to that of C-corporations, either on a temporary or permanent basis," the group wrote in its analysis. "In other words, our guess is that there is no means by which a business could get a single layer of taxation at a rate of 15 percent. However, we also acknowledge the arguments of those who perceive things differently."