Trump has so far released 3 contradictory tax plans

Donald Trump’s tax plan has, like an angsty teenager, gone through a long period of change and self-discovery over the past year. In its original form, it was clearly untenable, a $11.2 trillion behemoth that would slash the top income tax rate from nearly 40 percent to 25 percent, more than double the national debt, and give the richest Americans $1.3 million apiece.

Trump quickly realized he’d need to dial it back, so, in a kind of sadistic mafia loyalty test, he enlisted the Heritage Foundation’s Stephen Moore and CNBC host Larry Kudlow — who both love tax cuts in an intense, uncontrollable way — to do the very thing they hate most and make his tax cuts less generous.

The result was Trump's second tax plan, unveiled last month, which bumped up the top rate to 33 percent and added a deduction for child care expenses. It was a step in the right direction, but it didn't change the costliest parts of Trump's plan: its massive expansion of the standard deduction and its huge cut in the corporate tax rate from 35 percent to 15 percent. It still dwarfed the massive Bush tax cuts in size and generosity to the rich.

Enter Donald Trump tax plan the third, unveiled Thursday in New York. It is, like the second plan, an attempt to limit the cost of the cuts while integrating more child care benefits, as part of the Trump campaign’s recent push on that issue. Here are the basics of the new plan:

• Three brackets: 12 percent under $75,000 a year (for married couples), 25 percent for $75,000 to $225,000, and 33 percent for taxable income over $225,000. This is the same, higher rate structure as the second plan, and was clearly borrowed from House Speaker Paul Ryan's tax plan, which features identical rates.
• Same capital gains rates as today: zero, 15, and 20 percent. But rates would be increased slightly for high earners, as the 20 percent bracket would kick in earlier.
• The standard deduction for single filers will be $15,000, and $30,000 for married couples. This is a major change; initially Trump proposed $25,000/$50,000 standard deductions. The current proposal is a milder increase in the deduction.
• The plan would "cap itemized deductions at $200,000 for Married-Joint filers or $100,000 for Single filers." This is a really pathetically small change; very, very few couples have over $200,000 in mortgage interest, charitable donations, state/local taxes, and the like, such that a $200,000 limit would affect their lives in any way.

There are also a number of new child care measures:

• A new deduction for child care costs, capped at the average cost of child care in each taxpayer's state. This would be phased out for high earners (couples with taxable income over $500,000). This is a carryover from the second plan. Additionally, a deduction of up to $5,000 for elder care costs would be available.
• A refundable tax credit for child care offered through the Earned Income Tax Credit, "equal to 7.65 percent of remaining eligible childcare expenses, subject to a cap of half of the payroll taxes paid by the taxpayer." The maximum benefit would be $1,200 a year. This proposal appears to be new with this plan.
• Tax-free Dependent Care Savings Accounts, where families can save up to $2,000 a year for child or elder care expenses. The government would match 50 percent of contributions up to $1,000 a year for poor families. This too appears to be new.

But the biggest change comes to the business section. Previously, Trump proposed subjecting both C-corporations, which currently pay the corporate income tax, and "pass-through" entities, whose earnings are distributed to shareholders who then pay ordinary income tax, to his new 15 percent corporate tax rate. That would be a massive tax cut for the rich; about 69 percent of pass-through income goes to the top 1 percent of earners, which is likelier to own shares in that kind of company.

Trump’s third tax plan does away with this element, taxing only C-corporations at the 15 percent rate and having pass-through companies instead merely benefit from the lower individual rates.

The plan is still regressive, and very expensive

Just as with Trump's initial revisions last month, these changes move the needle a little bit but don't change the fundamental fact that the tax plan is enormously expensive and its benefits are targeted at the wealthy.

It’s helpful to take a look back at the Tax Policy Center’s initial analysis of the Trump tax plan from December, which broke down the plan’s cost by its component parts:

Many of these elements have been altered by Trump’s revisions. The $1 trillion cost of taxing pass-through income at 15 percent isn’t a factor anymore. The $4 trillion individual rate reductions and $3.3 trillion standard deduction expansion will still cost a lot, but less than initially projected.

But the $2.4 trillion rate cut in the corporate tax is not affected at all. Nor is the abolition of the estate tax, or of the alternative minimum tax. And while the rate cuts and standard deduction bump will cost less than the combined $7.3 trillion they did initially, they are still large in scale, and their total cost will easily reach the trillions. You can still expect net cost to rate in the several trillion dollar range, and to likely dwarf in scale the combined Bush tax cuts of 2001 and 2003.

Nor do the changes Trump has proposed change the fundamentally regressive nature of the plan. Yes, he offers refundable tax credits for child care to poor families and offers them a savings match. But the deduction he offers rich families with positive tax burdens is still more valuable — and increases in value for rich families with higher tax rates.

"If you spend $5,000 for your mom’s personal assistance and are in the 12 percent bracket, your deduction reduces your taxes by $600," Howard Gleckman of the Tax Policy Center writes. "If you are in Trump’s 33 percent bracket, it is worth $1,650—almost three times as much."

And the plan still devotes most of its cost to lowering rates, including a major reduction in the top rate (which by definition only confers benefits on top earners) and on the corporate rate; the corporate tax is considerably more progressive than the individual income tax, so cuts to it disproportionately benefit top earners.

Trump has definitely come up with a somewhat less wildly irresponsible version of his wildly irresponsible tax plan. But it’s still a massively expensive endeavor without a clear purpose, and whose benefits are targeted at the least-needy.