You get a tax cut, and you get a tax cut, AND YOU GET A TAX CUT!!!
A little lost when it comes to issues of public policy? Felling like this guy? Well relax, we’re here to help. This is 10-Point Expert, a series of articles that examine policies which are currently being introduced to the political landscape, in 10 simple to understand points. For this installment we talk about Donald Trump’s tax plan!
[UPDATE 08/09/16: So… Trump recently unveiled his new economic plan and had made some tweaks to his tax plan. While the broader strokes are generally the same, the three tax brackets have been changed from 10%, 20%, and 25% to 12%, 25%, and 33%. Otherwise, everything in this piece still stands regarding Trump’s tax plan. If you want our updated look at Trump’s economic plan, you can find it here.]
Point 1: Trump’s tax plan goes into four tax brackets: 0%, 10%, 20%, and 25%. Just as a reference, there are currently seven tax brackets with the current highest tax bracket paying 39.6% in taxes.
Point 2: Trump’s tax brackets would go as such:
- Paying No Federal Tax: Individuals making less than $25,000-a-year and families making less than $50,000-a-year.
Paying 10% Federal Tax: Individuals making between $25,001 and $50,000-a-year and families making between $50,001 and $100,000-a-year.
Paying 20% Federal Tax: Individuals making between $50,001 and $150,000-a-year and families making between $100,001 and $300,000-a-year.
Paying 25% Federal Tax: Individuals making more than $150,001-a-year and families making more than $300,001-a-year.
Point 3: Trump estimates that the tax bracket paying no federal tax would help around 75 million households. All they would have to do is send a one-page tax form titled “I Win” to the IRS. No, that is not a joke we are making up, THAT IS ABSOLUTELY TRUE!!!
Low-income people would file a one-page form with the IRS that says “I win” under Donald Trump’s tax plan. pic.twitter.com/N6jJHktctW
— Byron Tau (@ByronTau) September 28, 2015
Point 4: Much like every other GOP candidate’s tax plan in 2016, the estate tax and the Alternative Minimum Tax – a government safeguard to make sure the taxes of a wealthy individual doesn’t fall too much due to deductions – would be completely eliminated under the Trump tax plan. As for the capitol-gains rate, Trump’s plan would fall from 23.8% to 20%, combining that with the elimination of various penalties and deductions (ie the death tax, marriage tax, ect). However he did promise to close tax loopholes which many in the upper brackets take advantage of. Still for the upper tax brackets, tax policies like these are where they would get their tax breaks under Trump’s plan.
Point 5: If you work on Wall Street though, things get VERY interesting. Trump’s plan would eliminate the carried interest deduction that hedge fund and private-equity managers currently pay. Under his tax plan they would now be taxed at the normal rate of 25%. While it would raise the rate from the current 23.8%, if you look at the entirety of Trump’s tax plan, anyone working in Wall Street would pay lower taxes than they currently do.
Point 6: For corporations instead of the 35% top rate, which they currently pay, a corporate flat tax of 15% would be implemented under Trump’s plan. This 15% would apply to everyone that is characterized as a “business” which includes partnerships and S-Corps; which currently pay a separate tax rate under the current tax code.
Point 7: The Trump campaign estimates that US corporations are keeping about $2.5 trillion overseas. They want to give corporations a chance to bring that cash back onto US soil. He wants to do this by giving a one-time amnesty tax rate of 10% if they were to bring that money to US shores. After that amnesty period, Trump wouldn’t allow corporations to defer taxes on income overseas. However as an olive branch of sorts to multi-national corporations, his plan keeps the foreign tax credit.
Point 8: Alright, so what does this all mean? In all honesty, on the surface, the word that describes Trump’s tax plan is: traditional. Much like Jeb Bush’s tax plan, Trump’s tax plan is very similar to the average Republican tax plan (cut taxes on all bases, close corporate and individual loopholes, ect). Especially when compared to his other GOP primary rivals – Rand Paul’s 14.5% flat tax and Mike Huckabee’s “national consumption tax” – Trump’s broader ideas in his tax plan are almost quaint.
Point 9: Yet like with everything in life, the devil’s in the details. The thing is while Trump’s tax plan is similar to Bush’s tax proposal, the scale of which trump is cutting taxes is anything but. As stated before, there is a group of individuals under Trump’s tax plan that pays ZERO federal taxes! On top of that, every other tax bracket is getting cuts to their taxes as well as those in the top tax bracket. This could provide a problem because that would mean a significant chunk of money isn’t going to the federal government. Or as Howard Gleckman – a fellow at the Brookings Institution’s Tax Policy Center – puts it, “the offsets that [Trump’s] got in there, the proposed offsetting tax increase in here, would not come remotely close to paying for it.” Even the conservative non-profit Tax Foundation says Trump’s tax plan won’t be revenue neutral by any circumstance.
Point 10: Even though the Trump campaign insists that his tax plan is revenue-neutral – bringing in as much money as it’s giving out – the numbers aren’t really adding up. Trump’s tax plan is the Oprah giving cars of tax plans. Basically everyone is getting a tax cut here, which will play well in stump speeches, but policy wise isn’t sound at all! The traditional GOP tax plan tries to cut rates AND widen the base so more people pay into the system. Trump’s tax plan not only cuts rates, but weirdly shrinks the tax base, which in turn leads to adding billions – possibly even trillions (!!!) – to the national debt. If you’re cutting everyone’s taxes, great! But if it’s in service of creating an overall weaker economy, then…
(Photo Credit: DonaldJTrump.com, Google Images, Twitter)