Foster: With tax plan, Trump selling out his supporters
Nov. 24, 2017 at 11:02 p.m.
Donald Trump asked voters during the 2016 presidential campaign, "What the hell do you have to lose?" Less than a year into his term, the answers are becoming clear, starting with the massive tax plan he's trying to work through Congress.
Pay attention, East Texas conservatives, because according to several analyses, 80 percent of Trump's tax cuts will go to the top 1 percent of Americans, similar to the Bush tax cuts implemented in 2001-03. Meanwhile, middle class households will receive far more modest cuts and nearly 30 percent of taxpayers will end up paying more taxes.
Those are the findings of the Urban-Brookings Tax Policy Center after studying the tax proposal outline released by Trump administration officials who seem to gloss over the details with sweeping statements that don't stand up to scrutiny.
For example, despite promises the tax cuts would benefit the middle class, the average tax cut for most households would be $1,700 by 2027. Some 30 percent of taxpayers with incomes between $50,000 and $150,000 would see a tax increase while the majority of households that made between $150,000 and $300,000 will pay higher taxes.
Those trends are credited to the loss of itemized deductions, particularly the ability to deduct state and local property taxes from income, as reported by Carolyn Y. Johnson in The Washington Post.
The loss of the personal exemption, which shields $4,050 of income from federal taxes for every household member, also would play a major role in increasing taxes for some households, the analysis found — an effect that would get worse over time because the amount of the personal exemption kept pace with inflation.
Meanwhile, billionaires like Trump and his wealthy buddies serving in the cabinet, join the top 1 percent who would reap 80 percent of the tax benefits. Households making more than $900,000 a year would see their taxes drop by more than $200,000 on average.
In a recent speech in Indianapolis, Trump described the effects of the tax plan very differently.
"We're doing everything we can to reduce the tax burden on you and your family. By eliminating tax breaks and loopholes, we will ensure that the benefits are focused on the middle class, the working men and women, not the high income earners," he said.
If Trump honestly believes his own rhetoric, it's obvious he has little understanding of the economics behind the tax plan, just as he had little understanding of the health care issue. I quote Trump: "Who knew health care could be so complicated?"
The tax plan analysis also found it would provide disproportionately large benefits for businesses compared with what the middle class and low-income Americans would receive.
"A major feature is tax collections would shift dramatically, from businesses to individuals," said Eric Toder, a co-director of the Tax Policy Center.
The Trump plan calls for reducing the corporate tax rate from 35 percent to 20 percent although he originally wanted the lower rate of 15 percent. Also, he wants the top rate that small businesses pay set at 25 percent, but don't be confused by the definition of "small" businesses. That includes closely held big companies, "S" corporation and partnerships like the Dallas Cowboys.
Under existing law, these entities don't pay business taxes, but instead are taxed according to the individual income of their owner — up to a maximum rate of 40 percent. In the case of the Cowboys, owner Jerry Jones, whose worth is about $3.8 billion, would pay only 25 percent instead of the previous 40 percent, a massive tax cut. Only 4 percent of "small" businesses pay a tax rate higher than 28 percent so they get a tax cut while everyone else gets nothing.
Nothing, that is, except a growing national debt. The Tax Policy Center estimates Trump's plan would increase the debt by $2.4 trillion over the first decade.
If the administration wanted to do something for what most Americans consider small businesses — mom and pop stores, cafés, barbershops, etc. — then tax planners should cut from the bottom, not the top. They could maybe make the first $25,000 of income from the business tax free. At the same time, if they want to encourage hiring, they could double the deduction for employee costs.
But Trump isn't focused on working-class people; his tax plan benefits principally corporations and high income earners like himself. While Trump plays golf and stirs up culture wars to energize his base; he can't change the fact that he's selling them out with his policies.
— John D. Foster, a Carthage resident and former editor of the Panola Watchman, is a regular contributor to the Saturday Forum. Email email@example.com