GOP tax plan favors the richest, analysis shows
- Author: Leroy Wright Oct 02, 2017,
Oct 02, 2017, 12:05
The rate on corporations would be set at 20 percent, down from the current 35 percent. In this case, the Senate finance committee was told it could approve tax cuts that would add $1.5 trillion to the deficit over the next ten years when they would expire unless Congress voted to extend them. This would be a huge tax cut for most corporations, even if their tax breaks are severely limited. "Under our plan, the vast majority of families will be able to file their taxes on a single sheet of paper", Trump said. It's not just Silicon Valley though. They said they will - and said they will do so this year.
If things were as they should be, Wednesday's tax reform proposal by President Donald Trump would be subject to a certain amount of posturing before the Republican and Democratic parties actually put their heads together and got down to work.
If you assume that the economy goes gangbusters and everyone gets a lot richer, then the tax base swells, spending on social-safety-net services falls, and hallelujah!
Leaked records published in March showed that, under the alternative minimum tax, Trump was forced to pay $31 million in 2005, suggesting that eliminating the provision could benefit him and other wealthy individuals like him.
Banks also stand to gain in other ways, too. The Framework proposes many changes to the USA tax system, but does not propose any changes to the municipal bond tax exemption itself.
"Banks touch all the bases", said Art Hogan, chief market strategist at Wunderlich Securities. That is, they get far more than their share of the tax cut. Bob Corker of Tennessee - reached an agreement earlier this month that will essentially give the tax-writing committees the green light to write a tax cut that would include $1.5 trillion of tax reductions over 10 years as part of the overall reform effort. And a married couple will pay zero taxes on their first $24,000 of income.
Depending who's analyzing the information that is available, the Trump tax cuts will balloon deficits and add to the debt.
Oh, there are other cuts on the corporation side - a slash in the rates, and a switch to territorial taxation, rather than attempting to tax global income, as the US now does. The index has nearly quadrupled the September gains of the more international-focused S&P 500.
The broad-stroke plan was hammered out for months by a half-dozen congressional Republicans and Trump administration officials known as the Big Six. Due to their size, even just subtle improvements to the cash flows of smaller companies can have a big impact.
As had been previously announced, Trump is proposing to raise tax deduction amounts for families with children and create a new deduction for dependent adults such as the elderly or ill.
The fact that the plan would have uneven effects, particularly to people making between $150,000 and $300,000, was credited to the loss of itemized deductions, particularly the ability to deduct state and local property taxes from income.
Private-equity firms could also end up losing. The mortgage interest deduction, meanwhile, overwhelmingly benefits homeowners with incomes above $100,000. We should, instead, recognize that this is what politics will look like under President Trump: with the nation's top officeholders opting for lies instead of anything approaching the truth.
Of course, more negotiations are needed on the tax plan.
Senate Republicans used budget reconciliation -- which can only be used once per fiscal year - in their attempt to repeal and replace Obamacare this year.
But Hogan is betting it gets done, eventually.
But some intra-party disagreements are already emerging, and all eyes are watching to see if any disputes evolve into enormous obstacles that prevent tax reform from moving forward.