The first draft of the Republican tax reform bill will be discussed by president Trump later today. This blog post is meant as a brief summary of the issues most important to individuals and small businesses.
- Individual tax rates are 12%, 25% and 35% and 39.6%
- The standard deduction would be increased so fewer people would itemize mortgage interest or charitable contributions.
- Corporate tax rate will be 20%.
- A one-time low tax rate will be available to repatriate foreign income.
- The estate tax would be revealed.
- The deduction for interest expense would be limited.
- The deduction for state and local taxes would be repealed.
Analysts predict the tax bill will be expensive, costing up to $4 Billion per year in decreased federal revenues.
President Trump promotes the bill as a cut for middle-income Americans, But since the income brackets have not yet been revealed, it is impossible to comment on this claim.
The overwhelming majority of Americans oppose tax cuts for corporations and the ultra-rich, the primary purpose of this bill.
It is impossible to say what net effect the reform will have on working class Americans. We predict that taxpayers in states with expensive real estate and high real estate taxes will be hurt by the change while those who do not on homes will benefit.
The estate tax is paid by only the wealthiest multi-millionaires. It’s elimination serves to increase the wealth gap between the ultra-rich and the rest of us. Estate tax can easily be avoided by adopting a range of financial planning strategies. Elimination of the estate tax does not serves any useful social purpose. Some argue that the estate tax hurts jobs. I don’t see that. I see the forced redistribution of wealth among the few who do not adopt an estate plan as a positive societal force.
The bill’s promoters act as if tax simplification, like reducing the number of tax brackets, is a benefit to Americans. I don’t see that.
The most significant effect of the proposed tax reform bill is a sharp tax cut for the ultra-rich.
The tax reform bill will have minimal impact on the taxes of a large portion of working-class taxpayers.