NEW YORK _ Donald Trump's campaign last week eliminated any mention of one of his major tax proposals _ a proposed tax cut that would benefit private-equity funds and hedge funds _ from his published plan.
Now, after conflicting statements from Trump's advisers, an independent economist who has worked closely with Trump's campaign to review its tax proposals says he can't tell if that tax cut is alive or dead.
"This ambiguity is a big deal," said economist Alan Cole, of the Tax Foundation, a Washington-based tax policy group that took the unusual step Monday of issuing a range of potential costs for Trump's tax plan: Without the proposal, which would benefit a range of businesses from mom-and-pop grocers to hedge funds, the plan would cost $4.4 trillion over the next decade, before accounting for economic growth. With it, that cost would be $5.9 trillion _ $1.5 trillion more than Trump cited last week.
Trump's spokesmen didn't return several telephone calls seeking comment. Stephen Moore, an economist who has been advising Trump, said little to clarify the issue Monday. The campaign will work on the issue with the Republican-led House Ways and Means Committee, which writes tax policy, he said.
At issue is whether Trump's call for a 15 percent tax rate would apply to not just large corporations known as "C corporations," but also to partnerships, limited liability companies and other businesses known as pass-throughs. The pass-through structure is a mainstay of both small businesses and investment partnerships. Such businesses don't pay income taxes, but pass their earnings through to their owners, who then pay taxes at their individual rates. Because the current top rate is 39.6 percent, Trump's proposal represented a major tax cut for many pass-through businesses.
The original proposal had also represented an attempt to align tax rates for small and large businesses. Trump has proposed a 15 percent rate for C corporations _ down from the current top statutory rate of 35 percent. Now, according to the foundation's analysis, the plan is unclear.
"As of today, the campaign is unclear as to whether it will apply its 15 percent corporate rate just to traditional C corporations, or to both C corporations and pass-through businesses," the Tax Foundation said in a statement that accompanied its new analysis Monday morning.
Bloomberg News and other news outlets reported last week that Trump had dropped his proposal to create a new 15 percent tax rate on business income from partnerships and other pass-throughs from the latest version of his plan.
Cole, of the Tax Foundation, said Trump's campaign told him via email on Thursday that, going forward, "the 15 percent rate only applies to businesses that are taxed as corporations."
That day, Cole released an initial cost analysis for Trump's latest plan of $4.4 trillion, before considering the effects of economic growth. That number, which Trump also cited in a Thursday speech to the Economic Club of New York, was based on calculations that didn't include the special pass-through tax rate.
But the New York Times reported Friday that Trump's campaign had assured the National Federation of Independent Business, which represents small businesses, that Trump remained committed to the proposal. Confusion reigned through the weekend as Trump's advisers said in statements to various media outlets that small businesses could indeed use the 15 percent rate.
"This rate is available to all businesses, both big and small, that want to retain the profits within the business," said a note on the website.
But if businesses retain profit, they are no longer operating as pass-throughs; instead they'd resemble regular corporations. In his latest analysis Monday, Cole of the Tax Foundation acknowledged the lack of clarity and sought to sort it out.
The policy group released two cost estimates: the first, $4.4 trillion, applies if pass-throughs do not get the 15 percent rate, Cole wrote. The second estimate, $5.9 trillion, "assumes businesses must incorporate and pay shareholder-level taxes in order to take advantage of Trump's 15 percent business rate," the foundation's news release said.
The analysis entertains the possibility that "the Trump plan would allow more businesses to file their taxes in the way that C corporations do, even if their legal structure today would have them pay taxes as a pass-through."
If that hybrid approach is what Trump is proposing, partnerships would pay 15 percent before distributing earnings to their owners _ and the owners would pay a 20 percent tax on those dividends, according to the Tax Foundation analysis.
"It is not immediately clear that pass-throughs would benefit from adding a second layer of taxation by opting for the 15 percent tax on their retained earnings," the analysis found.
Trump has altered his tax plans since last year, when economists said his initial plan would carry a 10-year revenue cost of roughly $10 trillion. While campaigns routinely tweak their policy proposals, they typically do so behind the scenes through internal deliberations before disclosing a formal, published plan. Trump's campaign instead stirred a weekend full of confusion among policy analysts regarding its pass-through plan.
"You need a bunch of smart, experienced tax people thinking these things through and talking to practitioners on the ground," said Michael Knoll, a tax law and tax policy expert at the University of Pennsylvania Law School. He added: "That didn't appear to be happening."
Until the campaign provides more detail, it's not clear how businesses should respond, Knoll said.
"It's hard right now to say how much they're trying to come up with a coherent proposal, as opposed to a politically palatable one," he said.
