Trump Unveils New Tax Plan

 

 

 

 

 

 

 

 

By Jialun Wang ’21

Last Wednesday, President Trump and GOP leaders unveiled their nine-page tax proposal that, if passed, will result in the largest tax cuts in three decades.

“We want tax reform that is pro-growth, pro-jobs, pro-worker, pro-family, and yes, tax reform that is pro-American,” Trump said to hundreds of supporters during a rally in Indiana.

The tax plan proposes to consolidate the seven income brackets into three, with new tax rates at 12%, 25%, and 35%. Under the current system, the top bracket is taxed at a rate of 39.6% and the lowest bracket is taxed at a rate of 10%. While most taxpayers from every income quintile will see an average reduction in taxes under Trump’s plan, the top 1% will see the largest deduction in after-tax income. Additionally, because the tax credits for dependents and tax brackets are indexed for a slow measure of inflation, economists estimate that by 2027 all groups but the top 1% will see their tax cuts shrink, and the upper-middle class could potentially see an increase in their tax rate compared to that of the current tax plan.

The proposed tax plan would also reduce the corporate tax rate from 35% to 20%, double standard deductions to $12,000 for individuals and $24,000 for married couples, and eliminate the estate tax, an inheritance tax that applies only to those with assets above $5.49 million.

While Republican congressmen are convinced that the tax plan will spark economic growth for the middle class, Democrats remain unmoved.

“Under this plan, the wealthiest Americans and wealthiest corporations make out like bandits, while middle-class Americans are left holding the bag,” said Senate Minority Leader Chuck Schumer (D-NY).

The nonpartisan Tax Policy Center estimates that the proposed tax cuts would increase the budget deficit by $2.4 trillion over the next decade, with some estimates running as high as $7 trillion. The Senate Budget Committee released a blueprint last Friday that allows for a budget deficit of $1.5 trillion over the next decade, much less than that of President Trump’s proposed plan.

Republicans believe that increased economic growth will compensate for the lost revenue from the tax cuts despite an estimate by economists from Goldman Sachs that the tax cuts will add only 0.1 to 0.2 percent of GDP growth.

“This plan will be deficit reducing,” said Republican Senator Patrick Toomey, a member on the Senate Finance Committee.

Sources:

http://www.npr.org/2017/09/27/553860929/republicans-outline-biggest-tax-code-overhaul-in-a-generation&arubalp=1f647541-3954-4587-b0d1-fcdd99ce72

https://www.nytimes.com/2017/09/27/us/politics/trump-tax-cut-plan-middle-class-deficit.html?mcubz=1&_r=1

https://www.nytimes.com/interactive/2017/09/29/us/politics/trump-tax-plan-analysis.html?mcubz=1

http://www.bbc.com/news/world-us-canada-41423159

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