“New” Republican tax plan looks like all previous Republican tax plans…
The leaders of the Republican House, Paul Ryan, and of the Senate, Mitch McConnell unveil their tax cut plan. Credit: Ron Sachs/CNP/PA Images   

After failing to repeal ObamaCare, the Republicans who are supposedly in charge of Washington DC are moving on to their next big objective: tax cuts. The plan, as drafted, doesn’t look much different from what you might have expected from pre-Trump Republicans:

Let’s briefly examine some of the specifics…

The Republican tax cut plan remains in flux, but the basic outline released two weeks ago provides a sense of the GOP’s priorities. They are clearly seeking to do two things:

This will not be much of a tax “reform” (despite the headline given to the plan by its authors) but, unless changed, a large tax cut.

Cutting the rate of income tax for large corporations to 20% is the largest item in the plan. Many American small businesses are taxed as “pass through” income to taxpayers’ personal income tax returns. In order to provide rough equity in treatment the plan proposes to cut their top rate of taxation from 39.6% to 25%. These provisions ensure that the bulk of tax relief will flow to both large and small businesses.

Owners of capital or well-to-do taxpayers are benefited by two other proposals. The inheritance tax will be eliminated. This will only help taxpayers with estates in excess of $5.4 million (as estates below that level are already exempt from the so-called death tax). The top rate of income tax, paid by couples earning over $500,000 a year, will also be cut from 39.6% to 35%, although the plan states this could be less generous or even set aside as negotiations continue.

Taxpayers earning below these lofty amounts will see a variety of changes that will benefit some, hurt others, and leave many unaffected:

One can only guess what the final bill will actually look like. Moreover, we cannot be sure that this Congress can pass a tax cut plan – despite the sense that failure to do so will probably destroy their chances in next November’s 2018 midterm elections.

FOOTNOTES
  1.  President Trump has repeatedly stated he wants a 15% corporate tax rate despite most observers’ belief that such a drastic reduction is too large for Congress to stomach (current rate is 35% and the GOP is aiming to cut to 20%). The President says that America’s corporate tax rate is much higher than other nations and that reducing it dramatically, the US will attract investment and jobs to the country. Watch his speech supporting the plan, delivered on 27 September 2017
  2.  An analysis of the GOP plan by the Urban-Brookings Institution Tax Policy Center found that nearly thirty percent of middle-income taxpayers would see a tax hike under the plan, and that a majority of taxpayers earning between $150,000 and $300,000 would have their taxes raised.
(Visited 1 times, 1 visits today)