Yesterday, President Trump unveiled a tax “reform” plan. Here is the (mostly) good, a few bad, and one ugly piece of the plan:
The Good
1. Lowers taxes for millions of Americans;
2. Removes many Americans from the tax rolls;
3. Lowers the corporate tax rate — which is currently one of the highest in the world — to 15%;
4. Increases the standard deduction from $6,300 to $12,600 for individuals, and from $12,600 to roughly $24,000 for married couples;
5. Reduces the tax rate from 39.5% to 35% and collapses the current seven rate system to three rates of 10%, 25%, and 35%;
6. Allows a one-time reparation to bring millions of dollars of capital into the United States, thus jump-starting job creation and economic growth. (This was also a key feature of Ron Paul’s Restore America Now budget plan.);
7. Provides tax relief for families with child care expenses;
8. Repeals the Alternative Minimum Tax, which was created in the 1960s to squeeze more revenue out of the “wealthy” but now affects many middle-class taxpayers;
9. Repeals the death tax;
10. No VAT;
11. No border tax;
12. Repeals ObamaCare’s 3.8% tax on investment income;
13. Preserves the mortgage deduction, which helps reduce the tax burden of middle-class homeowners, and saves charitable deductions.
The Bad
1. “Pays for” the tax cuts by eliminating numerous deductions that enable Americans to lower their tax burden. The very notion that tax reduction needs to be “offset” with tax increases is rooted in the idea that the government has some moral claim to a certain percentage of your income and can never lose a penny of revenue.
Of course, the main reason tax increases are necessary to offset is because of:
The Ugly
1. Even with the elimination of tax deductions, many are claiming Trump’s tax plan would cause the deficit to skyrocket. Of course, we shouldn’t reject Trump’s tax plan out-of-hand. Instead, President Trump and Congress should work to merge tax reform with spending cuts.
President Trump has made a good start on cutting domestic spending in his proposed budget. Unfortunately, he uses those savings to increase the already bloated “defense” budget instead of using the savings to reduce the deficit and provide meaningful tax relief for the American people.
Here is Tim Carney on the plan.
