By Randy Deabay
America has been sitting on collective pins and needles to see what the current POTUS will offer as a new tax plan. America knows that one of the main components needs to be tax relief for corporations in return for hiring and spurring the economy, and secondly, tax cuts for lower and middle-income employees that are sufficient to enable them to be capable of making those purchases that will make a real difference.
Instead, as usual, the rich offer credits to the rich so that the rich keep getting richer. The high-income Americans do not spur the economy, but Donald offers to slash individual tax rates — cutting the top rate from 39.6% to 35% — and reduce the number of total rates from seven to three. In addition, he proposes cutting the top tax rate for all businesses to 15%, far below the current top rates. The tax rate for corporations should have some attachment to include higher tax cuts if corporations hire new employees, or raise hourly pay to truly make a difference to the economy and not for the investors only.
The proposal calls for reducing the number of tax brackets from seven to three for individuals, which would be set at 10%, 25%, and 35%. Today’s rates are 10%, 15%, 25%, 28%, 33%, 35% and 39.6%. But here’s the thing: The White House has yet to specify the income brackets that would apply to each of the three rates that Trump is proposing.
So it’s impossible to say what the change would mean in dollars and cents for anyone. Will this help the lower and middle-income individuals, or will it mostly benefit those making over $250,000? According to the Census ACS survey, the median household income for the United States was $55,775 in 2015. This means that the majority of tax breaks needs to be for those in that current tax bracket. The lower income bracket for 2016 was $16,020, so anyone making double that should see a no tax levy on a federal level if Donald is looking to actually spur the economy.
The proposal also calls for doubling the standard deduction. Treasury Secretary Steven Mnuchin said Wednesday morning that the new tax proposal will offer “the biggest tax cut and the largest tax reform in the history of this country.” Without greater detail from the White House, that’s impossible to verify. Americans want a clear understanding of what this tax proposal is aimed to do. Is it to make the rich richer, assist the poor, or spur the economy? These are questions America demands be answered.
Trump wants to slash the top tax rate for all businesses to 15%, just as he proposed during the campaign. That’s well below the top rate of 35% for corporations today, although the real top rate they pay is less after tax breaks. A drop to 15% would also be a huge drop from the 39.6% top rate paid by owners and shareholders of so-called pass-through businesses. Those run the gamut from mom-and-pop shops to law firms and hedge funds. In a pass-through business, the owners and shareholders report profits on their personal tax returns. The Mom and Pop shops, the small business owners, are the majority of employers in America and must see the majority of corporate tax restructuring.
Trump has also called for a low, one-time tax on the $2.6 trillion of profits that were earned overseas by U.S. multinational corporations and were technically never brought back to the United States.
Switch to a territorial tax system
Today, U.S. companies must pay tax on all their profits, regardless of where those profits are earned. Trump now joins Republicans who want to switch to a territorial system for businesses. That would mean U.S. companies would only owe U.S. tax on what they earn in the United States.
No border adjustment tax as proposed
Trump is not expected to back a controversial provision known as the border adjustment tax that was proposed by House Republicans. “We don’t think it works in its current form, and we will have discussions with [House tax writers] about revisions,” Mnuchin said Wednesday morning at an event held by The Hill. The President again does not understand that other factors such as tax breaks for foreign funds leaving America that come back from prior to being moved out of the country in the form of high breaks for bringing funds and jobs back to the U.S. are more beneficial for a corporation than what he has proposed.
Child care tax relief
An outline of the plan calls for tax relief for child care costs but doesn’t give much detail. During the campaign, Trump called for two tax breaks to help ease families’ child care costs. One would let parents deduct the average cost of child care in their state, based on their child’s age. The other would give a tax break to anyone who sets aside up to $2,000 a year to cover costs associated with child care and elder care.
The contributions would be tax deductible, then grow tax-free. Tax and child care policy experts have said both breaks, as proposed, would disproportionately benefit wealthier families. And in the case of millions of low- and middle-income families, the breaks could raise their tax burden when combined with Trump’s other proposals to eliminate head of household status, repeal personal exemptions and raise the lowest income tax rate to 12% from the current 10% rate.
Average, hard-working Americans are questioning “Dramatic Tax Cuts for Individuals”? Where?
What America will see is a bigger burden for the lower and middle incomes while the RICH GET RICHER AND THE POOR GET POORER, all due to an arrogant, greedy businessman serving as our POTUS.