Donald J. Trump, the candidate, made assorted promises to assorted groups about what he would do with taxes. At a rally in Scranton, Pa. he promised to “massively cut taxes for the middle class, the forgotten people, the forgotten men and women of this country who built our country.” At a town hall meeting on NBC’s Today Show, Trump said he believes in raising taxes for the wealthy. He has also promised to lower taxes for the wealthy and for corporations. The last part, he said, will bring jobs back into the United States. According to one survey taken after the last debate he had with Hillary Clinton, 51 percent of the people intending to vote for him supported increasing taxes on high earning individuals.
Trump, the President, has come out with his tax plan. Under it the top one percent, people like himself, will get about half of the benefits of his tax cuts. A millionaire would get an average tax cut of $317,000 up, depending upon how many millions he earned over the year.
Trump reduces the current seven tax brackets down to three distinct categories. He does away or repeals the head of household tax filing category. He raises the standard deduction for married couples filing jointly from $12,000 to $30,000 and for single individuals with or without children from $6,300 currently for those with no dependents to $15,000. Those who are currently single heads of households, like divorced women with children, would actually have their income taxes increased.
A family earning between $40,000 and $50,000 a year would get a tax cut of $560. But millions of middle class working families will have their tax bills rise under Trump’s plan. This is especially true for single-parent families because of the repeal of the head of household filing status as well as that of personal exceptions. Under Trump’s plan a single parent with $75,000 in earnings, two school age children and no child care costs would pay an additional $2,440 in income taxes. While a single parent with an income of $50,000, three teen-aged school children would be taxed an additional $1,186. A married couple with $50,000 in earnings and two school age would see a tax increase of $159. Many married couples would see no benefit from his so-called tax reform.
Presumably Trump’s proposal to cut the corporate tax rate from thirty-five percent to fifteen percent will help all taxpayers by boosting economic growth. He would also eliminate the Federal Estate Tax completely. This tax is paid by only the wealthiest taxpayers, by less than the top one percent. It’s a good way to keep wealth in the hands of the few. And, of course, he will do nothing to raise the federal level of minimum pay beyond $7.25 an hour.
President Trump’s Tax Plan does not deal with the needs of the Middle Class nor with single individuals raising families but is basically a give-away to the wealthy and the large corporations. He seems to be satisfying the economic group to which he belongs rather than dealing with the needs of the many.
The United States is a Federal Republic consisting of federal, state, and local governments. Taxes are imposed on each of these levels. These include taxes on income, payroll, property, sales, capital gains, dividends, interest, imports, estates, school districts, and gifts. There are also various fees and licenses. These are imposed on net income of individuals, businesses, and corporations by the federal and some local governments.
Most business expenses and some living costs reduce taxable income. Among these are mortgage interest, if you own a house, state and local taxes, charitable contributions, and medical costs. Payroll taxes are paid by both the employer and the employee, as are Social Security and Medicare. An unemployment tax is an expense only to the employer.
Property taxes are imposed by most local governments and many special purpose authorities like school districts. These are based upon the appraised value of the property and more than one such tax can be imposed upon a single property.
There are two types of taxation in the United States. One type is Progressive Taxation and all the others are Regressive Taxation. The Progressive is the Income Tax, as utilized by the Federal Government and a number of states. Here the more one earns the larger is the percent of their income they pay in taxes. In terms of Regressive Taxation, here everyone pays the same amount of their income regardless of how large or small it is.
A Regressive Tax would be a sales tax, value added taxes as in the purchase of gasoline or liquor, both of which would also include sales tax. It would be on imports, licenses for anything. It is a fixed amount that everyone would pay equally, regardless of how much or little they earn.
The problem with the progressive tax in America is that it is progressive up to a point and then it becomes regressive. Currently there are seven levels going from 10 to 40 percent of the taxed incomes after deductions are subtracted from the income. Progressive taxes go from $9,275 for a single person to $466,950 for a married couple filing jointly. In between these two there is another category called head of household, which is more than a single person pays and less than a married couple is taxed. After the income reaches $466,950, no matter how high it goes, the amount paid remains at 40 percent. Percentage wise the amount paid in taxes actually decreases.
Mitt Romney, when he was running for President in 2012 released his taxes for that year. The amount he paid was eleven or twelve percent of his annual income. The average family with an income well under $100,000 will pay 25 to 35 percent in income taxes.
The CEO of Hewlett Packard earns 15 million a year, which is over one million a month. Her taxes increase as her income rises in January, the first month of the year, until she reaches $466,950, then for the remaining eleven months of the year she will pay a fixed 40 percent of her income in taxes.
Donald Trump, who claims to have ten billion dollars, which he has never proven, has at least multi-millions. He pays the same 40 percent of his income in income taxes; but when eating at a restaurant would pay the same rate of sales tax as a man who could only afford to take his wife to a fancy dinner once a year.
Trump would reduce the current seven stages of income taxes to three levels: 12%, 26%, and 33%. His maximum income tax would be at 33 percent. A married couple filing jointly would pay $225,000. No one would pay a larger amount than the person earning a little under ¼ of a million dollars and heads of households would pay the single rate. Under Trump’s plan the system becomes far more regressive and the government collects far less in taxes during a period when the National Debt is over 19 trillion dollars. It could conceivably double under Trump.
Trump also wants to reduce the corporate tax rate from 35% to 15%. He argues that this will bring industry back to the United States. The actual corporate tax that the government collects is lower than that of Germany, Canada, Japan, and China, among others. The reason for this is called tax expenditures, which is a term designed to legitimize special interest tax breaks and loopholes.
The 35% tax rate for most large corporations is a joke. Some of the largest corporations in the United States pay no taxes at all. Two examples would be General Electric and Wells Fargo. These and many other major corporations pay no income tax because the Tax Code is riddled with exemptions and loopholes. These were essentially created by lobbyists. The Tax Code is 71,000 pages long. It has been constantly added to over the years.
From 2008 to 2010 at least 30 Fortune 500 Companies, such as Pepsi Cola, Verizon, Wells Fargo, and DuPont, paid more to lobbyists than they did in taxes. They spent $476 million pressuring Congress for tax break loopholes and special subsidies. They kept $164 billion in profits and received $10.6 billion in rebates.
In a sense it can be said that Congress sells loopholes and subsidies. Monsanto paid 22 instead of 35%, while DuPont received a 72 million dollar rebate when it made a profit of 2.1 billion dollars. Basically the Tax Code is a mess.
In the United States elections are expensive. The Congressmen from both parties accept contributions, particularly in the House of Representatives when they run for office every two years. In addition Congressmen accept benefices from lobbyists but, here, the Republicans are the worst of the two. They prattle on about free markets while protecting just about any market-distorting loophole. Essentially their campaigns are largely funded by the Pharmaceutical Companies who they allow a very large return on what they sell.
Legal tax scams do and have abounded in the United States; but will President Trump improve or worsen the situation? The high probability is that if Trump gets his way it will be like Christmas for the plutocrats in the country. While they have gotten away with all sorts of scams to date the situation will improve for them by 1,000 percent. The U.S. could well become a country of the rich, for the rich, run by the rich. Trump, who admitted to paying no income taxes for years will legally remain in that position. And so will others like him.
But Trump is not a legislator, he is the chief administrator in the country. Congress may not go along with him. As stated earlier the current Tax Code is 71,000 pages long. Trump had a problem with the Health Care Law. It is only 1,000 pages long. He found that group of laws very complicated. The Tax Code is 71 times more complicated. If he tried to simply eradicate the current law there would also be a lot of unhappy lobbyists whose companies would lose their subsidies. Some of these companies would even have to pay some taxes. Life can be very complicated at times!
The major problem that Trump seems to be facing with tax relief for corporations and the economically upper one or two percent is that his tax relief program will reduce the Federal Government’s taxable income by over 8 billion dollars. Initially his plan was to reduce the funding for Universal Health Care by about 8 billion dollars. But since every electoral district in the country is vociferously against doing away with Affordable Health Care he has a severe monetary problem. A tax cut of the dimensions he wants could double the National Debt by the end of his presidency. It currently stands at 19 plus trillion dollars. In order to fund his tax cut he has to defund Obamacare.
Stay tuned in, after failing the first time, Congress is again talking about “repealing and replacing” Affordable Health Care. Paul Ryan is again talking about a new bill that will make health care available to everyone who can afford it.