Tax Reform/Tax Cuts – Trump Plan, Republican Plan

The next items up on the Congressional agenda are Taxes and the Budget, including raising the debt ceiling (or shutting down the government). Trump has a tax plan that is very light on details and the Republicans have their own tax plan. There are two issues in play here. One is tax reform, which means revising the tax code. The other is tax increases or cuts.

Since Mitch McConnell says that he intends to do tax reform/cuts without any Democrats being involved, all of the negotiations are between the White House and the Congress on these issues. Democrats say that if the Republicans plan to cut taxes on the wealthiest Americans then they cannot be involved in such a plan and will continue to resist. As I understand things, Democrats might, if asked, like to have input into tax reform.

So what is in the 4 page plan from 45 with the heading TRUMP and the subheading TAX REFORM THAT WILL MAKE AMERICA GREAT AGAIN? Trump says he wants to

  1. Offer tax relief for middle class America – keep more money in their pockets and increase after-tax wages
  2. Simplify the tax code – easier to prepare taxes, everyone keep more money
  3. Grow American economy – discourage corporate inversions (corporations that merge with foreign firms to access a lower tax rate abroad), add a large (whoops, make that huge) number of jobs, make America globally competitive again
  4. Doesn’t add to our debt and deficit (the President obviously is unaware of parallelism as an element of written style). (It is also unclear how his tax reforms/cuts could accomplish these goals.

He says that he can achieve these goals by exempting single people who make less than $25,000 and married couples making less than $50,000 from paying any Federal income taxes.

All Americans will fall in four simple tax brackets (0%, 10%, 20% and 25%).

Marriage penalty is eliminated.

Alternative Minimum Tax (AMT) also eliminated.

No business will pay more than 15% of their income in taxes (which will make corporate inversions unnecessary).

No death tax for anyone.

Trump says he will make this revenue neutral by:

  1. Eliminating or reducing most deductions and loopholes for the wealthy
  2. One time repatriation of corporate cash held overseas at 10% – then an end to deferral of income earned abroad
  3. Reducing or eliminating corporate loopholes that benefit special interests, along with a reasonable cap on deductibility of business interest expenses

Here’s the tax table Trump includes in his document:

https://assets.donaldjtrump.com/trump-tax-reform.pdf

 

Here’s the tax table from 2016 from a Google image search:

Here are the projected financial impacts on various taxpayers from a Google image search:

Tax Rates in Republican tax plan:

This chart is from a Google Image Search but you can find much more information about the Republican plan at

https://files.taxfoundation.org/legacy/docs/TaxFoundation_FF516.pdf

I am no economist and taxes are definitely not an area where I feel that I have any expertise but I am an American citizen and as such I know that I need to understand this to the best of my abilities. I am not doing any in-depth critiquing in this article. I am just trying to pin down the details. I will try to seek out the experts eventually. But I do agree with the Democrats that if the goal of a plan is only to cut taxes on the wealthy and the corporations it will be difficult to back such a plan. Such a plan relies on “trickle-down”, which Republicans still try to force on America, despite data that proves there is no actual “trickle-down” effect from tax cuts on the rich. I think the other thing we have to watch out for is the cuts that Republicans will suggest for the budget in order to counteract the smaller revenue stream from cutting taxes. I plan to look over the budget plans of Trump and the Republicans in the near future.

I also believe that any tax plan and/or budget that makes Grover Norquist happy is a plan we should examine very carefully and probably oppose. (He is the head of the Americans for Tax Reform group that strong-armed Republican lawmakers into signing a pledge to never raise taxes – a pledge that led to lots of Republican drama in the Obama administration and a government shut-down.)

Then when the Koch Brothers also seem happy about these tax plans I assume that “we the people” will not be best pleased by any plan that passes muster with these two either.

Trump shocked these men, who are not part of our government and who should have only the one vote we all have, when he said recently, “The truth is the people I care most about are the middle-income people in this country who have gotten screwed. And if there’s upward revision, it’s going to be on high-income people.”

This statement does not match his tax plan says the NY Times. “Grover Norquist, the founder of the anti-tax organization Americans for Tax Reform, said he was certain that Mr. Trump understood that raising taxes on the rich would be bad for economic growth. He thinks Mr. Trump did not mean what he said.”

https://www.nytimes.com/2017/07/26/us/politics/taxes-republicans-congress-trump.html

A follow-up article on the next day in entitled “White House and GOP Leaders Reach Deal on Principles of Tax Overhaul” and contains more commentary on the Republican plan and what the Dems are saying.

“Mr. Ryan and Mr. Brady were both dismissive of Mr. Trump’s recent suggestion that perhaps the rich should see their tax rates increase to offer more relief to the middle class.”

“’The engagement and enthusiasm for pro-growth tax reform from Trump administration officials and congressional lawmakers is what will propel this over the finish line,’ said Neil Bradley, chief policy officer at the U.S. Chamber of Commerce.”

However we are told that “Democrats scoffed at the latest Republican outline as another vague set of ideas that would benefit the rich. ‘Republicans are dripping tax ideas out like a leaky faucet with no specifics to back them up,’ said Ron Wyden of Oregon, the ranking member of the Senate Finance Committee.”

The article also gives details that suggest that Republicans have no intention of working with Democrats in this matter.

https://www.nytimes.com/2017/07/27/us/politics/trump-taxes-congress-republicans.html

Yikes! Brain pain. What are your thoughts on tax reform/tax cuts?

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