The Editorial Board

USA TODAY

Last year’s election was supposedly about forgotten working-class Americans rising up against the elites. You wouldn't know that, however, from the Republican plan released Wednesday to overhaul the federal tax code.

The "framework" is not all bad, as many Democrats claim. The call to reduce the top corporate tax rate from 35% to 20%, for example, is sound and overdue. So is the effort to simplify what President Trump correctly called the "ridiculously complex" individual income tax code.

But a lack of fiscal restraint, plus two unwarranted giveaways to America's financial elite, make this version unworthy of support.

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By one initial estimate, the framework would result in $2.2 trillion in lost revenue over the next decade. That's unaffordable for a nation already $20 trillion in debt and facing soaring deficits as Baby Boomers retire. At the moment, the economy doesn't need this sort of borrowing-fueled fiscal stimulus.

Perhaps the most egregious provision in the GOP plan is a longtime goal of some of America’s wealthiest individuals, many of whom also happen to be major political donors: an end to the tax on inherited wealth.

Republicans, including Trump at his speech in Indianapolis on Wednesday, pitched this largesse as essential for family farms and other small businesses. That is disingenuous in the extreme. Individuals can already inherit $10.98 million from their parents tax-free. This plan would eliminate that very generous cap, allowing someone to inherit billions of dollars without having to pay the taxman.

Where’s the logic in that? Why should inherited wealth receive a more privileged status than wealth accumulated through work or entrepreneurship? Why should the government encourage dynastic wealth at a time when income and asset concentration among an elite few is already dangerously high?

And why, for that matter, should business owners pay a lower tax rate than some of their employees? That’s what would happen under a second objectionable element of the GOP plan, a 25% tax rate for "pass through" income.

Pass-through businesses — including sole proprietorships, partnerships and S corporations — account for about 95% of all businesses, ranging from food trucks to multinational conglomerates. They do not pay corporate taxes. Rather, their profits are recorded as income on the individual returns of their owners.

By setting the pass-through rate at 25%, rather than treating it as ordinary income, business owners would pay a lower rate than millions of Americans who make a good livings but are not wealthy.

The special pass-through rate has another problem: High-income individuals, whether business executives or basketball players, would seek to turn themselves into business entities. The authors of the plan realize this is a problem but have no real solution, saying only that they anticipate lawmakers will “adopt measures” to prevent this.

It has been more than three decades since the federal tax code was last overhauled. A major pruning is long overdue. But the plan unveiled Wednesday isn't complete. It isn't bipartisan. And it surely isn't addressed at the disaffected voters who put Donald Trump in office.

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