Editorial: Republican tax plan a boon for Trump, the rich. You? Not so much.

Donald Trump won the presidency last year in part by running against a political and economic system that he characterized as rigged against the average American and for the privileged few. A November 2015 analysis by The New Yorker’s George Packer described the anxiety that the Republican establishment, starting with The Wall Street Journal’s editorial board, felt over the fact that the GOP frontrunner was someone who didn’t believe in the party orthodoxy about always looking to help rich people pay less in taxes. Packer illustrated how well Trump’s message was playing with less affluent voters by quoting a young New Hampshire man: “If Donald Trump, a billionaire in his own right, is saying billionaires in Washington and New York should be paying more — that says something.”

Given this history, it is stunning to see how much the wealthy gain from the tax code plan proposed this week by House Republicans and embraced by the Trump administration. So much for Trump’s campaign message. That’s the tax plan’s first strike.

The second huge shortcoming of the GOP tax plan is that, according to Congress’ Joint Committee on Taxation, it would increase the budget deficit by $1.49 trillion over the next 10 years — ignoring the urgent long-term need to control U.S. debt. According to the Congressional Budget Office, interest on the national debt was already on track to reach a staggering $712 billion in 2026 and be the third largest category of spending by 2028 — ahead of national defense and trailing only Social Security and Medicare. Deficits need to be eliminated — not increased.

That’s not possible with a plan that would phase out the tax on estates worth more than $5.49 million and would end the alternative minimum tax that is an effective check on the wealthy using loopholes and skilled attorneys to avoid paying taxes.

This is indefensible. These households don’t need a huge favor from Uncle Sam. Since the 1970s, the top 1 percent of earners have gone from having less than 9 percent of total U.S. income to more than 20 percent. Yet the end of the estate tax and the alternative minimum tax means more than half of the $1.49 trillion in tax relief — $866.5 billion — would go to the wealthy via those two avenues alone.

To be fair, parts of the tax plan have merit. It collapses seven tax brackets to four and ends or limits nearly all itemized deductions, and while that leaves winners and losers, a simpler system is a better system because taxpayers spend less of their time and money on trying to avoid taxes. The tax plan would also encourage American firms to stop parking trillions of dollars in profits in other nations by cutting the tax on these funds from 35 percent to 12 percent. The cut in the highest bracket of corporate tax rates would bring the U.S. more in line with corporate taxes in other developed nations and would promote new investment and job creation, according to an analysis by the pro-business Tax Foundation.

The near-doubling of the standard deduction for individuals and married couples and the 60 percent increase in the child tax credit means many lower-middle-income households would no longer have any taxable income. Some middle-income families would also see lower tax bills. Hurt by decades of wage stagnation, these households deserve relief.

The primary losers of the GOP tax plan appear to be upper-middle-income families in states with high taxes and expensive housing — a group that includes millions of Californians. That’s because the mortgage interest deduction would be capped at $500,000 of debt for newly bought homes; the property tax deduction would be capped at $10,000; and state and local income taxes could no longer be deducted from federal taxes.

Nationally, only 5 percent of mortgages are $500,000 or larger. But California — a state in which the median home price is expected to reach $561,000 next year — has nearly half of those mortgages.

This would be tough to stomach in any tax plan. But given that the change is being sought to help pay for a $866.5 billion tax break for the wealthy, it is indigestible. California lawmakers should fight for a provision that is fair to California’s middle class.

And all lawmakers need to ponder the wisdom of increasing budget deficits when the cost of past borrowing is ballooning. A tax plan that makes this problem worse isn’t reform. It’s suicide.

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