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Donald Trump Vows Income Tax Cuts across Wealth Spectrum: Tax Code Simplification will Spur Growth

Donald Trump vows to cut income tax rates across the wealth spectrum which will benefit the poor as well as the wealthy. Casting aside tax and financial expert aspersions, Trump said his new tax code simplification will spur growth in the American economy.

At a press conference held at the Trump Tower in New York, Donald Trump said the major tax reduction he is planning will bring tax relief to most Americans including those in the middle income class. The revamped tax code will be simpler and will grow the American economy at a level that has not been seen in a long time, he said.

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The tax plan announcement is in response to queries asking for more details as to how Trump plans to run his government. One of the largest beneficiaries of the new tax regime would be those taking home the smallest paychecks. Individuals earning lower than $25000 ($50000 for married couples) would not need to pay income tax at all as per Trump’s plan.

However, many of the families in this bracket already pay no federal tax. About 45% of American households will not be paying an income tax as per the current tax code. Trump said that with his plan, about 50% of the American households will not owe federal tax.

Alan Cole, an economist with the Tax Foundation opined that Donald Trump’s plan just reiterates what the present tax code does. Maybe a few more could be added to the existing number from the lower strata of the society, he opined.

The proposal, however, will benefit the high earners extremely well. Trump’s plan is to cut down the highest tax rate from the existing 40% to 25% (for individuals earning $150, 001 and above and couples earning $300, 001 and above), a drastic cut.

This could make him look like a hypocrite as he has always been lamenting that those higher earners like him should be paying more tax. When asked how these tax codes will benefit him, Trump avoided the question and said, ‘We’re reducing taxes, but believe me, there will be people in the upper echelon that won’t be thrilled with this.’

The most pertinent counter question to his tax cut strategy is how he plans to offset these dips in revenue. To this question, Trump answered that his proposal will not affect the country’s deficit or debt. He argued that the loss of revenue from income tax cuts would be countered by multiple measures, including eliminating a few deductions for the rich and creating more incentives for US companies so that they can bring back money held overseas. All this could, in turn, boost growth within the US, he said.

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Roberton Williams, a senior tax expert at the Tax Policy Center, said that Trump’s plan was difficult to implement. The corporate side is getting huge tax breaks and the individuals are also getting the benefit of large cuts. There are not enough tax cuts to implement this scheme, he said.

Trump’s tax plan seems to simply mirror that of his rival, Jeb Bush, who earlier in the month had proposed tax cuts wherein the highest tax would be 28% and the lowest would be 10%. Bush’s plan entails corporate taxes to be cut from 35% to 20%, a very popular idea among the Conservatives. In this battle of tax cuts, Trump could lower the corporate tax to as low as 15%.

Another class of people who Bush and Trump plan to target is the investment manager group. Since his campaign launch, Trump has vociferously attacked hedge fund managers who get paid in carried interest and who get preferential treatment under the present tax code. He believes that luck plays a huge part in the earnings of hedge fund managers and they have to pay more taxes for their earnings.

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