The Truth about The Trump Tax Reform

The Truth about The Trump Tax Reform

Tax reform is finally on the table and major details of the plan have been revealed. The media has already begun to demonize the plan as one which exclusively benefits the rich and raises the liability of the poor. As usual Republicans and the Trump team refuse to defend the plan in public so most of the burden again falls on independent bloggers like me. I will go through most of the items included in the package and show why they are necessary. Once the actual tax brackets are revealed I will come up with an actual computation like I did in a previous article.

Standardized Deductions and Personal Income Tax

Raising the standard deduction and collapsing the tax bracket is one of the two core ideas in the proposal. The standardized deduction will be doubled for both married and single filers and the tax brackets will be collapsed to 12 25 and 35 percent respectively. The media has seized on this to show how Trump is raising taxes on the poor as the lowest tax rate will be rising from 10 to 12 %.

This is a lie. There is really no other way to say it. If you are currently in the brackets which pay 10% (up to 9325$) and the standardized deduction doubles then the most likely result is that you will pay no taxes. Even if you do end up paying 12% on some of your income the taxable amount will be much smaller due to the increased standardized deduction.

Since the standardized deduction has been increased other tax deductions are being removed. Fake news then uses this fact as a jumping off point to prove that the Trump tax reform plan is harmful to those with lower income. What no one in the news is saying is that the vast majority of people do not use these deductions. According to official IRS data in 2013 63% of filers opted to use standardized deductions. Data available from non-IRS sources say that in 2016 70% of filers opted for standardized deductions. If you are one of the 63-70% of the population who uses standardized deductions then removing these deductions will not affect you as you were never using them in the first place. In addition to this when you double the standard deduction you also push people into it so the deductions that are getting removed will not affect them.

One deduction I would like to focus on is the state and local tax deduction. The media has said that this unfairly targets Democrats. In a sense this is true. 1/3 of all the deductions from SALT come from New York, California, and New Jersey. Make no mistake, these are not the poor people in these states. They would already be taking the standardized deductions so would not be using the SALT. The people who claim these deductions are among the wealthiest in the area. If you will recall these are the very same people who say they want to pay more in taxes so others can get a tax break. They are now being given the opportunity to do this. If they actually do not want to pay higher taxes than they should petition their congressmen.

Corporate Taxes

The Trump proposal for tax reform lowers the corporate tax to 20% from its current 35% and removes some of the deductions that the companies can claim. This is of course being hailed by the media as a major tax cut for the rich at the expense of everyone else. Before we go further into this let me just point out that the Democrat recipe for tax reform is to keep it at its current 35% and remove the deductions. This is lunacy. In our current system we are already experiencing inversions as some of our companies are moving their headquarters to Ireland and other tax havens. For those who are wondering these are not companies like Walmart or Koch Inc which the left love to hate. The companies doing these inversions are those that the left loves like Apple, Google, or Microsoft. The very same companies that make California so rich.

America currently has a two tier tax system. There are companies who can afford to hire lawyers to take advantage of all the loopholes and deductions the law offers and they pay a real rate of 15-17%. Then there are smaller companies who cannot afford to do this which pay close to the statutory rate of 35%. In other words our current tax code helps companies like Walmart drive smaller ones out of the market. They already have enough other advantages they do not need the tax code too.

The Trump tax reform proposal levels the playing field between the two tiers. Since most deductions are going away both tiers will be paying near the 20% mark. This means that those companies who paid 16% before would have their rate increase while those who pay 35% would see a decrease. Of course the increase for those who pay a lower rate is offset by the lower need for tax lawyers and accountants.

Deficit

After praising Obama who doubled the deficit of all past presidents combined Democrats and their allies in the media find that they suddenly care a lot about the deficit. The accusation is that the Trump tax reform will blow this up.

This is again not true. Take personal income tax reform first. When you get a tax refund you do not hide it in your mattress. This is particularly true of those who have low incomes to begin with it. You would spend the money in your local economy for food or whatever else you want to buy. At that point the government already gets a cut of this in the form of sales taxes. The business owner who makes more money may end up hiring more people or the professional who provided the service would have more disposable income. They spend and the government gets a cut of that too. The very people arguing that a minimum wage increase would be good for the economy should be the first one arguing this point.

On the corporate side the companies that are taking so many deductions that they pay less than 20% would actually end up paying more (although again they would offset this by paying the lawyers less).

This tax reform is great for almost everyone involved. Not only does it lower the tax burden for most people it also simplifies the process. Since everyone is pushed into taking standardized deductions the time required to determine your taxes drops tremendously.

 

Someone who actually looks at the numbers and doesn't just listen what the news tells them! It is amazing that the news would push this false narrative when anyone can double check it assuming they know how tax works and dont just pay someone else to do it without ever being curious.

 

Here's a funny thought, if a Democrat administration had proposed doubling the standard deduction, they would be hailing it as a boon to the working people, bladebla, and RW partisans would be damning it. It is about as PROGRESSIVE a reform as is imaginable.

In topsy turvy populist America today, the opposite is the case. And this is where the "but what about the middle class?" Complex hypocrites get exposed for the LIARS they are. It's not about the middle class for them, it's for THEMSELVES, THEIR fat salaries for 1/3 or less the work of a private sector worker, THEIR fat pensions, THEIR ridiculous perqs that private sector workers can't dream of. It's about taking from YOU for THEM. Never forget that.

The American voters see this, and scratch their heads... initially. After seeing the same ignorant reactionary Complex propaganda 10000 times, and seeing it blown apart by the laser beams of the internet, they get peeo'd at being lied to. And after seeing these lie narratives WHILE being vilified as racists, ignorant hillbillies, etc., they get REAL peeo'd, enough to never vote for the central statism of the corrupt, incompetent Complex and its minions again. They, themselves are the mechanism of their own demise. The Trump admin doesn't even have to DO anything, they are digging their own graves and hopping right in. LOL.

 

Excellent OP filled with facts and truth.

Steve

 

The lower rate of 10% goes up to 12%...

... and the higher rate for business of 35% goes down to 20%...

... typical Republican tax program where the rich get richer...

... and the poor get poorer.

 

The hypocrisy of the left. Businesses arent people unless it comes to rhetoric for paying more taxes. I will give you a hint though. A successful business has NEVER in history paid a single penny in taxes.

Whats wrong with the bottom 50% of US citizens paying some taxes?

 

Q.E.D.

... and TWICE as much earned income is NOT taxed at all for a vast majority of middle income taxpayers. How'd you somehow -forget- that part?

 

your doubling the standard deduction which means the people currently paying 10% now would be paying 0%.

 

Also dems dont

One thing I used to agree with progressives with on is that corporations are not people. Oddly when it comes to tax they seem to forget that.

All people who benefit from the corporation will pay tax. Taxing the corporation itself is taxing what? growth?

 

But 12% of $0 taxable income is so much money!

 

What's wrong with SUCESSFUL BUSINESSES, paying a single penny in taxes, FOR THE FIRST TIME IN HISTORY?

 

When you bought your kewpie doll you didn't know that the business' cost included any taxes the company owes as an expense? Business income (your consumer money) pays for the taxes on their profits. When taxes are raised to businesses, the prices will rise to the consumer.

Steve

 

How do you tax them then?

 

Until we totally eliminate the income tax and adopt a simple sales tax we will always have a shell game going on in DC. But that would be asking the politicians to give up some of their power over us folks. I won't hold my breath.

 

Nope...profits

 

For it to be called a profit doesnt someone actually have to profit? You do know the people who work there, the CEO, and stockholders pay tax on their individual profits.

If you are a stockholder who makes 10k per year or if you make 2 million per year a corporate tax would mean you both suffer the same cost in corporate tax. Anyone who supports progressive tax should not support a corporate tax. Each stockholder should have access to the full profits and THEN pay tax on the overall combined income they recieved from normal income and investments.

Whatever income that does not go to stockholders should not be taxed since it goes purely to invested growth and/or emergency savings.

 

Corporations are sitting on 2 trillion dollars. Giving them a tax cut isn't going to spur them into doing what they could do now...and aren't.

Oh and this tax cut will add 2 trillion to the deficit

 

The rich just get richer because you don't listen. Why don't you read what I said instead of spouting the same old liberal bs. That 2 trillion can go to 'your' pocket. If you got rid of the corporate tax the stocks would actually be worth more to a poor guy because he wouldn't pay taxon it like the rich guy at the end of the year.

 

You probably couldn't comprehend that it isn't necessarily the "tax cut" that spurs economic growth. It is expectations of the future and less uncertainty. That's a concept Obama could never quite grasp when he began working on Obamacare after his stimulus package was passed. Obamacare canceled out the economic stimulus.

Steve

 

Huh? You think the "poor guy" has money in the stock market?

 

That's not a concept it's a fantasy

 

It's not a "fantasy," it's history. If Obama had done NOTHING, the economy would have improved more than it did since 2009. I knew you couldn't comprehend it.

Steve

 

To reiterate, I think tax reform proposals have an excellent chance of improving the economy. How much improvement happens depends on the people and business owners, and their expectations of the future. The mainstream media is in full propaganda mode to inhibit that possibility, however, the mainstream media now has the least number of people in history that believe anything from them.

The bottom line is still whether the people will have a belief in our future by putting their money on the line and making loans for large purchases.

Steve

 

Uhm does this poor guy work a job? Part time? Seasonal? Something?

 

Is that why Trump keeps everyone guessing, about who will gain and lose from the tax cuts and everything else? Or is the inability of the GOP congress to do anything despite holding the majority reducing uncertainty? I don't think so.