After months of secret negotiations, the Trump administration and congressional leaders have come up with a tax plan — sort of. What they have really come up with is a wish list of tax cuts for the wealthy, with lots of “we’ll get back to you on that” promises where the details are supposed to be.
This much is clear: The tax “framework” published by Republican leaders on Wednesday would greatly increase the federal deficit, would not turbocharge economic growth and could leave many middle-class families worse off by ending deductions they rely on. It would do little or nothing to improve the lot of the working class, a group President Trump says he is fighting for. It would instead provide a windfall to hedge fund managers, corporate executives, real estate developers and other members of the 1 percent. And can it be just a happy coincidence that Mr. Trump and his family would benefit “bigly” from this plan?
On income taxes, the framework calls for reducing the top tax bracket to 35 percent, from 39.6 percent, which would benefit people earning $418,400 a year or more. It would also raise the rate for people in the lowest bracket to 12 percent, from 10 percent. Republicans say they will offset that particular burden by roughly doubling the standard deduction to $24,000 for a couple ($12,000 for a single person). In addition, the proposal would eliminate most itemized deductions except mortgage interest and charitable donations. This could greatly hurt middle-class families in New York, California and other states with high local and state taxes that the families will no longer be allowed to deduct from federal taxes.
Under the guise of helping small businesses thrive and thereby creating jobs, the Republicans propose to lower the tax rates paid by people who earn money through private equity firms, partnerships, limited liability companies and other businesses — the very entities that Mr. Trump earns much of his income from. The framework would tax such so-called pass-through income at 25 percent, rather than at ordinary income tax rates. But here’s a depressing truth: The administration’s claims to the contrary, the plan would not help most small businesses, since they already pay less than 25 percent because their incomes put them in lower tax brackets. It would help millionaires, with the 400 richest households saving an average of $5.5 million, according to the Center on Budget and Policy Priorities.
You can read the rest at the New York Times.