President Trump announced a new tax plan last week that would simplify the personal and corporate tax code and, on the whole, lower taxes.
The current seven-tier system of individual tax rates will be cut down to three brackets, and corporate tax rates will be capped at 25 percent, rather than 35. Trump says the new plan will help the middle class and that it’s “not good” for him personally.
Most Americans would see marginally lower taxes as a result of the proposed plan. Unfortunately, it disproportionately favors the top one percent of earners, and Trump’s deception about his personal benefit from the proposed change in tax code is troublesome.
While taxes would be lower for the lower-middle class and the very wealthy, upper-middle class Americans would actually see a tax increase, according to the nonpartisan Tax Policy Center.
For about 12 percent of citizens, tax rates will drop, but some itemized deductions will be removed simultaneously. These deductions currently outweigh the proposed tax cut, so more than a tenth of the country will immediately pay an average of $1,800 more each year.
As time goes on, the tax cuts seem to favor the very rich exclusively.
A new deduction for people with dependents will be added, but it won’t be tied to inflation. That means that this deduction, largely aimed at the middle class, becomes less valuable each year.
By 2027, all but the top one percent will only see minimal tax cuts, and more than a quarter of the country will be paying more than they currently are.
The Tax Policy Center analysis admittedly does not factor in the possible economic growth of this tax cut, but it will have to make up a lot of ground to be financially viable. The plan will increase the federal deficit by about $2.4 trillion over the first decade — almost wholly due to the lower corporate tax rate.
While lower taxes are a better alternative to high tariffs to keep businesses in the United States, it will be difficult to see $2.4 trillion in realized gains due to this tax cut within the next ten years without cutting spending.
Rather than throwing caution to the wind and increasing the deficit, something Republicans claim to loathe, the GOP should at least cut government spending to make up for the loss in tax revenue.
For instance, the U.S. spends over $600 billion annually on the armed forces — more than the next eight countries combined.
A tax cut combined with a modest reduction in defense spending would be a much safer economic bet for taxpayers that wouldn’t increase the already massive national debt.
In addition to the economic issues with the tax plan, Trump’s proposal is steeped in political power moves and outright deception. Trump is in the top 0.1 percent of earners in the U.S. — the earning group that would see the most benefit from this tax plan.
His claim that this tax break is “not good” for him personally is unfounded.
It would be nobler to at least admit he benefits from the restructure and then explain why he believes it to be good for Americans.
Additionally, Trump told Sen. Joe Donnelly, D-Indiana, he must support the tax reform or Trump will “campaign against him like you won’t believe” in the next Senate race. This seems like an odd way to approach a self-proclaimed nonpartisan reform.
Trump’s tax plan is dubious. 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.
Sustained lower taxes on middle-income families with deductions that track to inflation would be more effective in the long run, and Republicans in Congress should turn away from Trump's proposed plan.