Trump's new tax plan will require him to stay more on message than usual

  • President Donald Trump will unveil the latest version of his tax plan on Wednesday.
  • Trump wants a 15 percent corporate tax rate, though negotiators included a 20 percent rate in the latest plan.
  • The plan lowers the top tax rate while raising the lowest rate.
(From L) US Secretary of State Rex Tillerson, US President Donald Trump, Commerce Secretary Wilbur Ross and advisor Jared Kuchner take part in bilateral meeting with Saudi Arabia's King Salman bin Abdulaziz al-Saud at the Saudi Royal Court in Riyadh on May 20, 2017.
Mandel Ngan | AFP | Getty Images
(From L) US Secretary of State Rex Tillerson, US President Donald Trump, Commerce Secretary Wilbur Ross and advisor Jared Kuchner take part in bilateral meeting with Saudi Arabia's King Salman bin Abdulaziz al-Saud at the Saudi Royal Court in Riyadh on May 20, 2017.

When President Donald Trump unveils the latest version of his tax plan on Wednesday he will face two challenges: Staying on message, and trying to convince people his plan isn't a hand out for the rich.

Neither will be easy.

People close to the president are worried that he could undo months of careful work by GOP tax negotiators by restating his desire for a 15 percent corporate rate. The negotiators have agreed to shoot for 20 percent, which Trump has never liked, though that number is part of the latest blueprint.

"He's the one guy left in Washington who still wants a 15 percent corporate rate," one person close to the president and the tax reform discussions told me this week. "They could put 20 percent down on paper and he could go out and say 15 percent anyway. He goes to these tax meetings and people just hammer him, but he still wants 15 percent."

There is also concern that Trump could use his speech Wednesday to go back into a riff on the NFL or some other issue intended to rally the base and muddy the message on taxes. Republicans also worry that Trump could make unrealistic claims about the tax plan, including that it could ignite 6 percent annual economic growth. That is something he reportedly said on Tuesday. No serious economist thinks it is remotely plausible.

What Trump has to do instead, senior Republicans say, is continue to hammer home the message that cutting the corporate rate will be more internationally competitive. And he needs to argue a switch to a territorial international tax system will cause more companies to spend and grow in the United States, leading to more jobs and better wages.

It's not an easy sell with most Americans believing corporations and the rich pay too little in taxes, not too much. But Trump has actually proved adept so far at connecting the corporate side of the tax plan to jobs and incomes.

On the personal side of the equation, Trump also has a challenging case to make. His plan calls for lowering the top rate from 39.6 percent to 35 percent. It also calls for raising the bottom rate from 10 percent to 12 percent. And it recommends lowering the "pass through" rate some individuals pay on business income to 25 percent. It would also eliminate the alternative minimum tax and the inheritance tax, which Republicans label the "death tax."

All of these provisions tend to benefit the wealthy and hit those with the lowest incomes. Trump has to make the case that his proposed doubling of the standard deduction and increased child tax credits would actually leave those at the lowest income level with more money in their pockets, not less.

And on the top end, GOP negotiators will point to the part of their blueprint that says Congress could consider adding a fourth, higher rate for top earners. This area of the debate exposes a fissure within the GOP. Trump very much wants to say he is not cutting taxes for the highest earners, and that the elimination of deductions and the possible higher top rate will ensure that.

But many Republicans on Capitol Hill, including House Ways and Means Chair Kevin Brady, aren't especially concerned with that perception. They want to cut taxes for everyone and don't worry much about distribution charts that show benefits accruing to the wealthy.

But if Democrats can successfully show that any Republican plan showers benefits on the wealthy, they could tap into the majority of the country that wants to see the rich pay more. This is also where the pass through issue gets very tricky. GOP tax negotiators are promising there will be "guard rails" to ensure that rich doctors, lawyers, money managers and other white collar workers don't game the system.

One concern, for instance, is those higher-income workers could claim ordinary income as business income taxed at 25 percent. Those working on the issue say those protections will be difficult to achieve.

And the decision to bump up the bottom rate to 12 percent, regardless of all the other changes, is an odd one that will give Democrats a huge opening to claim the plan lowers the tax burden on the rich while raising it on the poor — what the left has historically called "Robin Hood in reverse."

Republicans are now counting on Trump, famous for veering far off message into personal vendettas, to articulate a clear and consistent case on why the GOP tax blueprint would be good for all Americans. And they are holding their breath.

—Ben White is Politico's chief economic correspondent and a CNBC contributor. He also authors the daily tip sheet Politico Morning Money []. Follow him on Twitter @morningmoneyben.