“If this is what happens when you vote Republican, then why vote Republican?” – Rush Limbaugh, May 1, 2017. It’s a good question.
The most thorough analysis to date of President Trump’s tax plan is 
the Tax Policy Center’s report on a very similar plan that he proposed last year. It projects that the 20 percent of Americans with the lowest incomes would gain $110 annually. The 20 percent with middle incomes would gain $1010. The 20 percent with the highest incomes would gain $16,660. And, most stunning of all, the one tenth of one percent of Americans with the highest incomes would save $1,066,460 every year.
That will be paid for by increasing our federal deficits and debt at the rate of more than $700 billion per year. Every year, every American (even children who can’t vote) will become responsible for repaying $2153 in new debt. Counting principal and interest, Trump’s tax plan would burden every child born in 2017 with about $64,000 in new debt by their twenty-first birthdays.
That’s a great deal for children born into extremely wealthy families because they will get over a million dollars a year in tax savings. But for a child born to a poor or middle class family, the debt will be a barrier to success in a nation that can’t continue living on borrowed money. Here are a few examples of what President Trump is trying to sell us and some alternative reforms that would serve the nation better.
Trump’s plan would eliminate the estate tax. He calls it a “death tax” and says it impedes the inheritance of small businesses and family farms. But the estate tax only applies to assets in excess of $10.9 million passed on by a married couple (half of that for an individual). Repealing the estate tax will allow heirs of the super-rich to receive millions of dollars as tax-free inheritances while those who work for their money pay income taxes. This idea is the ultimate example of an entitlement mentality among American aristocracy. If President Trump has been truthful about his net worth, the estate tax repeal will allow his heirs to receive $10 billion tax free.
How is an inheritance not income? Some of the wealthy will argue that they already paid income taxes on the money to be passed on. I hope that is true. When a middle class family pays to have their home repainted, they have already paid taxes on that money. The painter will be taxed on his income too. Taxing earned money while not taxing inherited money – what a way for the President to treat the blue-collar workers who elected him!
President Trump wants to eliminate most itemized deductions but keep the one for mortgage interest. It serves the purpose of making home ownership easier but wealthy Americans frequently mortgage homes and use the proceeds to pay for second homes or income producing investments. With that in mind, we should cap the size of deductible mortgages at an amount that subsidizes ownership of a nice home. There is no justification for subsidizing million dollar mortgages.
The President wants to cap corporate taxes at 15%, which he says will encourage business expansion here by making our taxes competitive and slightly lower than other nations. He’s right about that. Corporations should be viewed as tax collectors not as tax payers. They collect from customers and then pass some of their income along as taxes.
A better idea is to pass the tax liability for corporate profits (and deductions for losses) along to shareholders at whatever rate they pay on earned income. This will allow lower-income families to invest and begin accumulating wealth while paying low or no tax. Those with higher incomes would pay more. Under that policy, each taxpayer would pay the same rate on wages as on investment income.
Our tax code offers more advantages for the extremely wealthy than can be covered in a column of this kind. The Trump plan will move us further down the road toward establishment of an entitled American aristocracy – exactly the wrong direction to go if we want upward mobility into the middle class and beyond.
President Trump’s proposal is the proverbial pig wearing lipstick. This pig would require every American to borrow money that will pay for tax cuts for the extremely wealthy. Its lipstick, some nearly inconsequential tax cuts for the poor and middle class, is a thin disguise.
Links for additional reading:
https://www.nytimes.com/2017/04/26/upshot/winners-and-losers-in-the-trump-tax-plan.html
http://www.foxbusiness.com/politics/2017/04/25/stockman-trumps-tax-plan-dead-before-arrival.html
How high are American taxes compared to other nations? CLICK THIS LINK: https://data.oecd.org/gga/general-government-revenue.htm#indicator-chart