Trump advisers insist tax cut proposal won’t favor rich

October 02 07:05 2017

The United States’ corporate tax rate is, as of now, the highest in the world. Trump told Donnelly – who had joined the president at the event – to expect a fierce campaign against him if he didn’t vote in favor of the GOP’s tax plan. It took time. The Taxpayer Protection Pledge shared with all candidates by Americans for Tax Reform has been signed by more than 90 percent of congressional Republicans.

As Holtz-Eakin put it earlier this year in an opinion column for The Washington Post: “Proposing trillions of dollars in tax cuts and then casually asserting that such a plan would “pay for itself with growth”.is detached from empirical reality”.

Many critical questions about the GOP’s tax framework remain unanswered – including how to pay for it without blowing up deficits and whether it’ll ever become a reality. Possibly gone would be people’s ability to deduct state and local taxes as well as eligible medical expenses.

“The concept of supply-side, trickle-down economics, Reaganomics, those theories that were mainstreamed in the 90s and attempted again under George Bush II tax cuts, both of those periods of time, this theory that people will reinvest tax money did not materialize”.

The Trump administration argues that it can accelerate the economy’s growth far beyond its current pace and, in doing so, generate enough federal revenue to cover the shortfall.

Tax reform is a politically loaded issue for Trump, given that he was ostensibly elected on the back of his populist tone.

“The framework”, intones the document, “contemplates that the committees will adopt measures to prevent the recharacterization of personal income into business income to prevent wealthy individuals from avoiding the top personal tax rate”.

The plan caps the tax rate on business profits at 25%. But there are too many gaps in the proposal to know how it actually would affect individual taxpayers and families, how it would be paid for and how much it might add to the soaring $20 trillion national debt.

President Trump has released the framework for his tax reform and reduction plan to positive reaction from conservatives.

The top tax rate, however, would reportedly be cut from 39.6 percent to 35 percent. “In this system of taxation, we’ll get down to a few fundamentals, should we pass tax legislation if it’s not revenue neutral?”

The analysis also found the plan would provide disproportionately large benefits for businesses compared with what the middle class and low-income Americans would receive. Taxpayers can also claim personal exemptions of $4,050 for each dependent. These deductions now outweigh the proposed tax cut, so more than a tenth of the country will immediately pay an average of $1,800 more each year. “My gut”, he said in a telephone interview, “is they can make a pretty good case: Send them a message”.

“In our district, 54 percent of our taxpayers itemize their deductions”, he said. The rest take the standard deduction. It appears to slightly help the middle class on the surface, but the realized benefits diminish over time and end up falling to the extremely rich instead.

Rep. Tom MacArthur, a moderate Republican from New Jersey, said that losing that state and local deduction would be a major blow for his constituents back home. I walked through one example of an upper-middle income family that would pay more.

“There is going to be a large number of middle class families that are going to be severely disadvantaged”, Hanlon said.

So how to cover that cost? With a slender majority in the Senate, Republicans have failed to muster a majority of their own members to repeal the act.

The administration has a ready response to that problem. Taxpayers in the bottom 95 percent would see tax cuts averaging 1.2 percent of after-tax income or less next year.

“One percent of GDP means $3 trillion”.

After months of intraparty battles that pitted conservative hard-liners against House leaders and moderates, the tax framework generated enthusiasm this week across the GOP’s usual ideological fault lines. That perspective is shared by economists monitoring the financial and credit markets.

More broadly, the Senate plan promises a balanced budget over the coming decade, but it relies on rosy projections of economic growth and spending cuts that Republicans have no plans to deliver.

Ron Sachs  Getty Images

Trump advisers insist tax cut proposal won’t favor rich
 
 
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