Trump's ambitious tax cut does not explain how to avoid raising the deficit

President Donald Trump presented some details of his anticipated tax reform plan this week in which he bet on gigantic tax cuts for both businesses and individuals, but left unclear how he will offset the fall in revenue without raising the deficit.

True to his grandiloquent style, Trump announced at a ceremony in Indianapolis Wednesday that it was a "revolutionary change" and a "never seen" tax cut since the one approved by former President Ronald Reagan in the 1980s.

"The biggest winners will be middle-class workers, because jobs will return to our country, companies will start competing for US workers and wages will continue to grow," he said.

"It's not good for me, believe me," said Trump, a billionaire fortune-owner in his real estate business, refusing it was designed to favor higher incomes.3

However, the Democratic opposition has already stated its unwillingness to cooperate since, according to Senate minority leader Chuck Schumer, "not a penny should go to tax relief for the rich."

Schumer also warned that Trump's plan puts the funding of the Medicare service, the system of health access subsidies for those with low resources, at risk, as it can see its funds cut to balance the accounts.

The framework plan, released jointly by the White House and Republican leaders of Congress, reduces the corporate tax rate from 35% to 20% and simplifies individual income tax brackets by moving from the current seven to three: 12%, 25% and 35%.

The new figures mean lowering the maximum rate for people, currently 39%, and raising slightly the minimum of 10%.

It would also eliminate the inheritance tax, create a new deduction for dependent adults, such as older or sick people, and expand the base for people to $ 12,000 and 24,000 for couples.

The unknown that remains undisclosed is how it will compensate for the consequent fall in tax revenues, estimated at around $ 5 trillion in ten years, to avoid generating more budget deficits.

Trump's proposal, White House officials said in a conference call to present the plan, included the removal of much of the existing tax exemptions, which would offset some of the cuts.

However, according to estimates from the Center for Budget and Policy Priorities, there would still be between $ 1.5 and $ 2 trillion to be offset in 10 years.

Asked about it, Trump's chief economic adviser, Gary Cohn, the push generated by the sharp tax cut will accelerate the economy enough so that the budget deficit does not rise.

"We will bring business back to the US, we can make jobs come back and make us very competitive. I think we can pay for the entire tax rebate plan through growth in the business cycle, "Cohn said, promising" substantially higher "growth at 3% a year.

But researchers at the Chye-Ching Huang and Joel Friedman think the proposal was "overly optimistic" because it is based on economic growth not seen in years in the US.

In the last four years, the US GDP has grown at an annual rate of around 2%.

The last time that USA expanded at an annual rate of over 3% on a sustained basis and for more than 3 consecutive years was between 1996 and 2000.

The proposed tax reform is Trump's big legislative trump before the end of the year, after the failure to overturn and replace the health care reform known as Obamacare, which Republicans have been unable to pull through despite majority in both the Lower House and the Senate.