Desperately seeking something to claim as a victory before the 100 day mark, last week the Trump administration unveiled what it titled the, “2017 Tax Reform for Economic Growth and American Jobs,” subtitled: “The Biggest Individual And Business Tax Cut In American History”. It was so amateurish that it was laughable. It was literally a one pager with several bullet points. Decades ago had I submitted something like that in management school I would have been laughed out of the class as the instructor balled up the paper and threw it back in my face. This is the product of what Trump promised us would be only the best and the brightest that he would surround himself with?
Over the years I have criticized the various Ryan Plans because they were based on unrealistic assumptions, lacked sufficient detail and often literally didn’t add up. By comparison they look like comprehensive, authoritative works. I expected Trump’s announcement to be lean on details; this was skeletal! Real tax reform would require a voluminous work; this looked like something scribbled on a cocktail napkin. The scary part is that Trump is supposedly sober. What’s impairing his brain or is he just stupid?
We’ll start by looking at proposed tax brackets. All business income would be taxed at a rate of 15%. Individuals would be looking at three brackets: 10%, 25% and 35%. One vital detail is missing: the thresholds where you cross from one bracket to another.
The feature that will seduce many to back the plan is the doubling of the standard deduction. That would benefit a lot of taxpayers at the lower and middle income levels. My advice is: Don’t be seduced!
Trump’s fantasy plan calls for eliminating deductions but it doesn’t specify which. In fact his apologists have been tripping over themselves about which deductions are or aren’t on the chopping block. The reality is that nobody (including Trump) knows.
Trump proposes to do away with three taxes that only apply to the wealthiest among us. (I’m not surprised, how about you?) The broadest is the Medicare Surtax which doesn’t kick in until a couple exceeds $250,000 in adjusted taxable income, (not to be confused with gross income). By the best statistics I can find that is less than 2% of Americans. In other words it doesn’t mean a thing for 98% of us.
Next comes the Estate Tax or as the fear inspiring Republicans like to call it the Death Tax. In order for an inheritance to be subject to this tax it must be at least $5.49 million. That affects about 4/1000th of a percent of taxpayers. Joe Lunchbucket isn’t among them. However repealing the tax would cost the treasury about $19.7 billion in revenue; you figure out the rest.
Also eliminated is the Alternative Minimum Tax (AMT). I lack hard numbers on the repercussion of that repeal but let me refresh your memory. A few weeks back two pages of Donald Trump’s 2005 mysteriously showed up in David Cay Johnston’s mailbox. The only reason Trump paid taxes that year was the ATM. Again, this has no impact on Joe Lunchbucket’s tax liability.
Another interesting proposal was a one-time low tax on repatriating foreign profits that have theoretically never returned to America. This is a complicated topic that would take much more than an article to fully discuss, but let’s try and learn from recent history. In 1986 Ronald Reagan managed to get a repatriation bill passed with the promise of business investment resulting in jobs and prosperity. What happened was that most of the money was used to buy back shares and further enrich the already very wealthy.
Since Trump is the first American President since Richard Nixon, (hardly the “yardstick” of honesty in the Oval office), to refuse to release his tax returns we really don’t know how much he and his family would personally benefit from his plan if it became law.
This much I know: I never made enough to be subject to the AMT. I will never inherit enough to worry about the Estate Tax, (I’m married so it would have to be just shy of $11 million to kick in). Unless I see some unexpected windfall I’m under the Medicare Surtax by a good margin. Donald Trump can’t make any of those three statements but I bet my readers can.
The good news is that for a variety of reasons this plan has almost zero chance of becoming law. That aside, my question remains: Is this the work of the best and the brightest we can muster in America?
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