Fresh on the heels of scrapping his America First Health Plan, President Trump is turning his attention to his promised tax reform. But after finding resistance from not only the Democrats, but his own party, as well, will Trump change his strategy? While there is as yet no official look into Trump’s tax reform plan, based on his campaign promises and actions thus far in office, we can make some educated predictions.
What Can We Expect from Trump’s Tax Reform Plan?
After his health plan fiasco, Trump is looking to work more closely with not only those within his own party, but with Democrats, too, in order to get his tax plan passed. The GOP has always been looked at as a collective of rich white men. So with Trump honing his tax plan to more closely reflect the GOP’s platform, it should come as no surprise that the group to benefit the most from the next tax reform would be the ultra wealthy, and corporations.
Trump’s plan looks to consolidate the current seven income brackets into three, with cuts for income taxes to all. Single taxpayer thresholds will be half of joint filers, getting rid of the marriage penalty, with head-of-household filing status thrown out, as well.
Standard deduction amounts would more than double from current levels, but personal exemptions would be eliminated. Another plus comes for families. Taxpayers would see a larger allowable deduction for child care costs — regardless of whether those expenses are itemized or not — for up to four children, whereas current tax law allows for just two children. Additionally, the lowest tax bracket would see even more childcare benefits for taxes.
But the biggest break would be for the wealthy, who would at long last be free of the estate tax, which taxes money passed down through inheritance even after being taxed when earned. That tax only applies to estates worth more than $5.45 million, meaning that savings would be massive.
But the biggest winner would be corporations.
The goal of Trump’s corporate tax cuts would be to give businesses more money to invest back into their business and, in theory, create more jobs. As such, Trump wants to more than halve the top corporate tax rate from 35% to 15%. In addition, any overseas funds could be brought back into the country one time with a 10% “repatriation” tax.
And while all of that sounds great to taxpayers, there’s one big issue — who will cover the lost funds?
Tax dollars go into effect for public programs and projects, such as veterans benefits, transportation, unemployment, and Medicaid. Those dollars also pay for defense spending. And since Trump is asking for a $54 billion increase in military spending, that makes reducing taxes across the board a puzzle.
For programs and spending taxes don’t cover, the government borrows from other countries. So with nothing but cuts, paired with increased government spending, the U.S. debt could grow significantly. In fact, according to the Committee for a Responsible Federal Budget, the reform would cost $10-12 trillion in lost revenue over 10 years.
Watch this video from PBS News Hour to know more about Trump’s tax reform plan:
Some of Trump’s plan should pass without any problems, such as consolidating the tax brackets. However, a lot of the plan, specifically the corporate tax rate, will need to be compromised for this plan to get passed. But tax reform is a significantly less controversial topic than health reform, meaning that if Trump works with lawmakers, he has an opportunity to affect tax reform change for years to come.
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