WASHINGTON (AP) — President Donald Trump and congressional Republicans are proposing a far-reaching plan to cut taxes for individuals and corporations, simplify the tax system and nearly double the standard deduction used by most Americans.
“Too many in our country are shut out of the dynamism of the U.S. economy, which has led to the justifiable feeling that the system is rigged against hardworking Americans,” says the blueprint, obtained by The Associated Press. “With significant and meaningful tax reform and relief, we will create a fairer system that levels the playing field and extends economic opportunities to American workers, small businesses, and middle-income families.”
The public unveiling of the plan was set for Wednesday.
The plan nearly doubles the standard deduction to $12,000 for individuals and $24,000 for families. This basically increases the amount of personal income that is tax-free.
It collapses the number of personal tax brackets from seven to at least three.
The rates would be 12 percent, 25 percent and 35 percent — and Congress would have the option of adding a fourth bracket for high-earners. But the plan does not set the income levels at which the rates would apply, so it’s unclear just how much of a tax cut would go to a typical family.
The plan would seek to help families by calling for a higher tax credit and limiting the marriage penalty on the joint income of couples who both work.
Deductions for mortgage interest and charitable giving would remain, but the plan seeks to end most itemized deductions that can reduce how much affluent families pay.
The estate tax — which is levied on millionaires — would be eliminated, a likely boon for wealthy individuals who inherit businesses, investments and real estate.
Companies would find themselves paying substantially lower tax rates, part of an effort to make U.S. businesses more competitive globally.
Corporations would see their top tax rate cut from 35 percent to 20 percent. For a period of five years, companies could further reduce how much they pay by immediately expensing their investment in capital goods.
New benefits would be given to firms in which the profits double as the owners’ personal income. They would pay at a 25 percent rate, down 39.6 percent. This creates a possible loophole for rich investors, lawyers, doctors and others, but administration officials say they will design measures to prevent any abuses.
The administration says say the tax plan is focused on helping middle class families. But — despite six months of talks with congressional leaders — the outline still lacks vital details about how middle class families would fare. There are also signs that the wealthiest sliver of Americans could still reap tremendous benefits from the proposed changes, even though President Donald Trump has suggested that rich will not be better off.
Didn’t we hear something similar about the GOP’s healthcare plan — fair, everything covered, “everyone would be covered…”
Pardon me if I don’t believe you dickheads.
On one of last Week’s CNBC noon shows, a few guys were reacting to a presentation the same day with M’nuthin’ and the public updates on the “tax reform” situation.
The participants were the regulars, one of whom is a “Young person, small account Outreach” guy for an older “private Wealth”–say 5 million account size manager. Another is cheek-by-jowl with the larger hedge-fund guys, including the outfit Mercer worked for, and the big one–SAC–that has been recast after basically getting scuttled by the SEC.
Most important, the guest for the entire hour was Jim Chanos, renowned/notorious for his ability to profit from declines in overpriced stocks.†
In addition to M’nuthin’s presentation but were also familiar with other proposals circulated to lobbyists for the “many sides” of this scrum. These might have come from Congress–no names mentioned there, tho, because as usual, these guys were acting like the lobbyists control everything.
The first thing Chanos said was that we weren’t going to be hearing much from KStreet about lowering the corporate tax rate, because under most of these proposals it’s going to go up.
The only conclusion I can come to is that the Fortune 500 CEOs are reasonably satisfied with the situation, Chanos quoted a “cash rate”=–his term–in the teens(%). If this is true, it’s privately accepted high corporate taxes aren’t hurting our international competitiveness at all, because the rate is comparable to those from The Competition overseas.
Moving along, the Gang more or less agreed that there would be efforts to decrease the rates for two groups who comprised Trump’s ACTUAL CONSTITUENCY. These are: “Boutique” business owners who employ 50 people, and professionals whose businesses are partnerships–subchapter S and LLC. SBA elegible companies are mostly up to 500 employees. Chanos’ business is the kind of partnership the boys were talking about. According to Chanos, this goes to the heart of people who still pay higher rates than the corporations and execs. The rates are governed by “pass throughs**” and the hand-to-hand industry-to-industry, account-type lobbying will be brutal, possibly scuttling changes.
Then there’s the widely-discussed proposal to do away with interest deductibility(mortgage, etc.) to “pay” for the “reform.” There was general agreement, if instituted that not only Real Estate but all asset prices would go down. One of the guys wisecracked that “that’d be illegal.” Seconded.
To summarize, all the stuff M’nuthin’ said, that the talking heads on TV and the 'Net are and will be buzzing around and microanalyzing, in the estimation of Chanos et al, is irrelevant.
Which leaves passing a simple across the board cut–but how much it is and how much if any won’t be for the .0001 richest is the question. If the middle class gets nothing they’ll talk trickle-down or corporate tax, even though it’s bullshit.
With me, these 3-4 guys collectively have more credibility than anyone else I expect to see “weigh in” in the next month. Cohn* knows plenty but he won’t be saying anything to impede the possible legislation.
†-it’s more complicted than this, he’s always net “long”, but that doesn’t affect this topic AFAIK.
*“Stay up, Gary, I’ve got money on ya!”
**Pass-through income is sent from a pass-through entity to its owners. The income is not taxed at the corporate level – it is only taxed at the individual owners’ level. A pass-through entity is a special business structure that is used to reduce the effects of double taxation.-Merriam-Webster.
A national VAT?
As a
proposal, wouldn’t surprise me. There was another discussion today which I’m boiling down for later that likens a lot of this stuff to the Border Tax, i.e. unpassable. Even with presidential leadership which is of course lacking.
At this point do we really need to know the details? Trump’s Razor tells us it’s a massive tax break for the Koch’s and Trumps, The rest is just window dressing and obfuscation.