As part of his promised “America first” political agenda, President Donald Trump has proposed a series of massive tax cuts for businesses and citizens alike.
Here are the facts of President Donald Trump’s Tax Reform:
Facts of this Situation
Personal Taxes will be lower and simpler to file
As the tax plan currently stands, there are seven separate tax brackets with tax percentages peaking at a bit over 40%. In addition, the federal tax code is an overwhelming 73,954 pages (as of 2013; Source: CNN Money).
Statistics show that the current tax code is far too difficult for the average citizen to understand. According to the White House’s official website, “Taxpayers spend nearly 7 billion hours complying with the tax code each year, and nearly 90% of taxpayers need help filing their taxes.”
However, President Donald Trump’s Tax Reform aims to simplify the current mind-puzzling tax code to make filing taxes a less taxing process.
The President’s first order of business is to reduce the number of tax brackets form seven to three; instead of brackets that top out at over 40%, the President’s plan makes three simple brackets: 10%, 25%, and 35%.
His next order of business includes condensing the number of pages in the tax code and the number of forms in the IRS tax code. Instead of the nearly 200 forms in the tax code and the 211 pages in your typical 1040 form, President Trump wants to condense each case into one.
Overall, the President’s goal is simple: allows Americans to keep more of their money to spend on other important aspects of their life.
Corporate taxes will be significantly lowered
The current business tax code has rates ranging from 15% to 35% and includes many tax breaks that allows companies to engage in their own special interests.
The President wants to eliminate the range of percentages and have a simple 15% flat tax rates for all business sizes.
In addition, President Trump’s Tax Reform includes following through on a huge campaign promise: protecting American workers by emphasizing American businesses over its foreign competition.
Through a combination of a Territorial tax system and a one-time tax on overseas dollars, the President is looking to make the American homeland the #1 spot for businesses to build their new factories.
Lastly, the President wants to eliminate the tax loop holes that allow companies to pay lower than their “fair share” of taxes. Ironically, the company that has been bashing Trump about paying no taxes, the New York Times, used corporate loopholes to pay zero taxes in 2014.
Eliminates taxes and tax breaks that hurt the average citizen
The wealthy in the United States are notorious for hiring an army of lawyers to find every single loophole to get out of paying for their taxes.
As one who has been able to chop off chunks of his taxes during his time as a business owner, President Trump knows these loopholes and is now planning to use his newfound power to close them off.
All loopholes will not be sealed off, however, as “Home ownership, charitable giving, and retirement savings will be protected.”
In addition, President Trump wants to eliminate a series of taxes that he believes are either duplicative or plain theft of the citizens’ money.
First is the Alternative Minimum Tax (AMT), a two-part system that requires each taxpayer to do their taxes twice to determine the higher amount. The President’s team thinks this makes “no sense” and wants to enact “one simple tax code.”
Second is the death tax, a tax that takes a portion out of one’s estate after he or she dies. President Trump is looking to eliminate this tax to assure “their children aren’t hit with a huge tax when they die.”
Third is perhaps the lowest tax, but a highly impactful one for President Trump: the Obamacare tax. Although the tax is a measly 3.8%, Mr. Trump wants to destroy this “direct hit on investment income and small business owners.”
What is and is not included in the reform
In addition to all of the aforementioned parts of President Donald Trump’s Tax Reform, there are a few notable exceptions from the plan.
For one, President Trump is leaving his ambitious Infrastructure plan, which includes investing $1 trillion in American Infrastructure, out of his tax reform plan.
However, some of the parts he included in his plan are highly impactful as well.
The most prominent example is the President’s plan to double the standard deduction, meaning married couples will have to pay zero dollars in taxes on their first $24,000 of income.
Experts say the reform will lower the federal revenue and heighten the deficit
With the lowering of taxes comes a shortfall in government revenue.
Economists are saying that the drastic tax cuts the President is planning to pass would “significantly reduce federal revenue” and “balloon the federal debt.”
The Committee for a Responsible Federal Budget, a bi-partisan organization, estimates that the cuts would cause a loss of approximately $3-7 trillion in federal revenue over the next decade.
However, President Trump already has a plan to combat this situation. In addition to cutting taxes, the President is looking to cut a large portion of federal spending over the next decade to balance the budget and reduce the debt.
With this year’s budget and future budget plans, President Trump is looking to cut about $3.6 trillion in federal spending over the next decade.
While the numbers are not exact, they show that a combination of tax cuts and government spending cuts will balance each other out and not increase already monumental federal debt.