Last year, Donald Trump proposed an extremely aggressive plan that would have distributed big tax cuts to all Americans (but especially to the highest-income households) and added $11 trillion to the budget deficit over 10 years. Last month, he proposed Trump 2.0, which scaled back many of those proposals. Today, he rolled out Trump 3.0—an even more modest plan that ditches more of his most ambitious, costly, and controversial ideas.  

Among the biggest changes he proposed today:

• Trimming his proposed standard deduction from $25,000 for single filers ($50,000 for joint filers) to $15,000 ($30,000 for joint filers). The current deduction is $6,300 for singles and $12,600 for couples.
• Scrapping his plan to tax the income of pass-through businesses such as partnerships at 15 percent. Instead, he appears to want to tax this income at the same rates as other income reported on individual tax returns. His original plan would have opened the door to a huge new tax shelter.
• Capping itemized deductions at $100,000 for single filers and $200,000 for couples. He did not say whether any deductions would be excluded from the cap. In earlier plans, he would have exempted mortgage interest and charitable gifts from limits on deductions.
• Allowing firms to choose how to write-off business investment. As recently as August, Trump said businesses could expense their capital investments in the year they are acquired, and deduct their interest costs. This combination would have opened the door to many new tax shelters. Now, Trump says firms could elect to expense their investments or take ordinary tax depreciation. If they decide to expense, they would lose the interest deduction.
• Creating a new tax-based subsidy for families with childcare or eldercare costs and a generous new tax-free savings plan for these costs. This was not included in his prior proposals.

  These changes are on top of the revisions he made last month. Those included scaling back his plan to cut individual tax rates. He initially would have collapsed today’s seven rates (with a top rate of 39.6 percent) to three brackets with a top rate of 25 percent. In August, he modified that plan to a three bracket structure with a top rate of 33 percent. Trump adopted this and several other ideas from a plan proposed in June by House Republicans.

It is not easy to parse much of what Trump proposed today. For instance, in his prepared speech, he said his economic plan would generate 4 percent annual economic growth. But that contradicted a fact sheet that he put up (and then took down) from his website that promised 3.5 percent growth. He provided no evidence to support either claim.

Similarly, it is difficult to understand how his plan to allow firms to elect whether to expense capital costs would work. For instance, what would happen when firms merge or otherwise change their structure?

Trump insists his new tax plan would cut taxes by $4.4 trillion over 10 years but only reduce the deficit by $2.6 trillion. He gets there, in part, with that economic growth he promises. But that’s not all. His plan would tax unrepatriated foreign earnings of US-based multinationals at 10 percent. Experts have calculated about $2 trillion in overseas income is available to be taxed. Trump, without evidence, assumes the amount is $5 trillion, which would generate $300 billion in extra revenue.

Trump 3.0 is probably somewhat less regressive than Trump 1.0, but it still is likely to provide outsized  benefits to the highest income households. It may be less costly than his initial plan, and certainly will be more palatable to establishment Republicans. At the same time, supply-siders may be disappointed with rate cuts that would be less generous than last year’s version.

These are not small revisions or mere clarifications of earlier ideas. They are significant changes in tax policy. The real question is whether this is the last word on Trump’s campaign tax agenda, or whether we will see Trump 4.0 before November.