Closer look at tax plan
To the editor:
This week Donald Trump previewed his much-hyped tax reform plan. As a liberal Democrat, I fully expected to oppose the proposal from jump, but — I gotta say — there are points in the proposal I think warrant consideration.
Example: It slashes the corporate rate from 35 percent to 20 percent, which seems like something only a Republican oligarch could approve, but let’s consider the justifications given for this proposed 15-point drop. According to an oft’ repeated Trumpian claim, the U.S. has the highest corporate tax rate in the world. This high rate, he claims, prevents international businesses from coming to America and drives American businesses to more tax-friendly locations overseas. Now, I don’t know if that’s true or not. I’m not a CEO of an American or foreign business, so I’ll defer to his alleged expertise.
Therefore, I accept that our tax rate should be 15 points lower than the world’s highest tax rate. As it happens, the U.A.E. actually has the world’s highest tax rate at 55 percent. Still, the president is correct — we should change our corporate tax rate to 15 percentage points less than that. However, that means raising our corporate rate from 35 percent to 40 percent rather than lowering it to 20 percent. It would also mean we’d bring in twice the revenue from corporate tax receipts while still having a low rate compared to most other wealthy nations. (A bonus: Trump could brag that his corporate rate is 10 percentage points lower than what the grandfather of trickle-down economics, Ronald Reagan, proposed for the majority of his administration.)
Now, let’s look at POTUS’ personal income tax proposal. His tax plan proposes shifting from seven brackets to three in order to simplify things. I’m not exactly sure what this simplifies. There are still brackets, they are just bundled into new rates, but Donnie says this is simpler, so I’ll take him at his word. However, the new brackets do not fulfill the president’s promise to lower taxes for all Americans. In fact, of the previous seven brackets, four (a majority) pay the same rate or higher, and one of the groups paying more under this plan are the poorest Americans who pay 50 percent higher taxes (their rate increases from 8 percent to 12 percent.)
One thing I think we all can appreciate is under this plan the Child Earned Income Credit and the standard deduction go up, theoretically offsetting the increase in tax rate. (Although the deduction for a married couple with two kids actually drops, and most see only a 15 percent deduction increase.) Could this work?
Look, we’ve already seen that we should actually be increasing the corporate rate. Why not just leave most of the brackets alone, shave off the top bracket (as the president proposes — or better yet don’t) and implement the new standard deductions and EIC giving Americans more spending power to bolster the economy?
Oh, he’d also screw sole proprietorships and blue state residents. Surprise.
J. David Core