Those who do the math and examine the tax plan have debunked the headline. That the tax cut is for the middle-class and regular people. But Trump and the GOP keeping using those two words. Unless people pay more attention immediately this may work. Paul Ryan wants to vote next week. The nation is focused on other issues this week. Tax talk isn’t high on the fringe-o-meter. It can’t compete with gun control and racism talk. But this tax cut is really for the very wealthy. These tax cuts will be paid for by eliminating itemized deductions that the middle-class use currently to reduce their taxes. With only the promise that these eliminations, packaged as tax simplification, will save the middle-class money. Even the GOP puts the middle-class savings at only $1000 a year. Dispassionate accountants have estimated that some in the middle will pay less and some more. But mostly a wash. The very wealthy and companies will greatly benefit. The budget deficit will increase. In 2023 and 2025 taxes will increase for the middle-class if this bill is passed and not readdressed. No attempt was made to reform tax avoidance from corporations stashing money offshore as part of this “revolutionary” tax reform. Middle-class deductions will be eliminated in favor of increased standard reductions. Allegedly resulting in tax savings.
Deficits Will Increase
The corporate tax rate will create a big-league shortfall in revenue. How do we know this? First, the budget recently passed had no reduction in spending. Second, in the last two weeks completely new ways of offsetting that revenue loss has magically appeared in the tax plan. In the form of deduction elimination. Somebody is scared about revenue loss and the solution is cherry picking the working class. Another assumption is the increase in revenue generated by a 20% corporate tax rate. As we know there is still wide debate as to whether trickle-down economics work, or create jobs, or whatever.
Middle-class Itemized Deductions Eliminated
The state and local deductions which help lower your federal taxes based on the amount you owe in state and income taxes would be eliminated. Taxes on your taxes yay. Another is a cap on the mortgage interest deduction which is to be limited to mortgages under $500,000. If interest rates remain low and supply remains low then $500,000 mortgages will be very common in the middle-class. The alimony tax deduction for payers of alimony could be eliminated. Teachers currently can deduct personal expenses they incur for class use and that may end. Why should teachers have extra money? Disaster losses currently can be deducted but that is also on the potential chopping block. Major medical costs exceeding 7.5% of your gross income currently can be deducted but that is also being looked at. The Republicans not only are telling all Americans that good health is not a right and that you are completely on your own, but also if you fall ill and pay those huge medical costs they still want your taxes too. Property tax deductions above $10,000 are also being marked for elimination. The personal exemption for someone like me will be eliminated. Can you feel all the middle-class tax relief love in this paragraph?
The talking point is cutting the corporate tax rate will create so many jobs that tax revenue will just flow in. But the truth is the people in the back room, and the people who really know this stuff and study it for a living, know the balance needs to be made up somewhere. From all I have researched this bill is being mailed directly to the middle-class.
Corporate Rate 20% and Estate Tax Eliminated
A secret, which isn’t really a secret, is that most corporations already pay little in taxes. Research the list of companies and the taxes they paid as a percent of their gross income in 2016. Corporations aren’t suffering an unbearable tax burden. None of them are paying close to the base rate in the thirties not even close. The estate tax which is on inheritance and pass through income would be eliminated. I agree that double taxing wealth just because the holder dies is bogus. But don’t sell it to me as part of middle-class tax relief. That’s all. The typical Trump and GOP bait and switch. These are the pieces the GOP really wants and what the big money shadows want. The Baby Boomer ruling class is setting themselves up for the markets to maintain its froth before cashing out in the next zero to ten years.
Positive Aspects of the Tax Plan
A reduced corporate rate will help small businesses that don’t have access to loopholes. You can do your taxes on a postcard. Won’t that be just swell I guess. The complexity of doing itemized deductions is what results you from paying more tax. Accountants and Turbo Tax also make taxes easy. Standard deductions increase. This is the argument for simplification as well as middle-class tax savings. Wealthy families will be able to pass on their wealth without paying taxes a second time. Explosion of jobs and wealth for everyone!
Offshore Money Not Addressed
Nothing from the party of honor, country, and god was done to try and bring back money corporations are stashing offshore to avoid taxes. If those companies try and bring the money back it will be taxed. That is why the money is there for balance sheet purposes and because the Internet created the tax loophole. Physical location semantics. If the focus was jobs they could make a law that investment in jobs would be tax free if that offshore capital is used. Or just let the companies bring it back tax free for a certain period and close the loophole. Doesn’t matter as it won’t be addressed with this push.
Revolutionary and once on a lifetime tax reform should have something innovative shouldn’t it? But there is literally nothing. How about a new middle-class deduction for extraordinary rent? Millennials are paying $24,000 a year in rent for apartments in cities so they can get jobs. Bottom line is nothing new.
Must Win for Trump and Establishment GOP
This is huge for Donald Trump and the GOP. Trump must have a win and if he can’t push a tax cut for the wealthy through with a majority then what can he accomplish? Culture stuff unrelated to governing? The establishment GOP must have this as the current powers like Mitch and Paul owe this to their mega-donors. But it will cost that group the party because the working class will learn once and for all that the GOP do not represent them. Also, the remaining fiscal conservatives are going to freak out and run for the hills and call for disruption. No tax talk today. But I guarantee it will be hot very soon before the turkey, stuffing, and pies.