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Trump, GOP Tax Plan Gives Away $2 trillion to the Wealthy, Corporations – Raises Taxes for Poor Families

Trump, GOP tax plan
The White House

President Donald Trump and Congressional Republicans Wednesday unveiled a GOP-crafted “tax cut” framework that tax experts say is tilted in favor of millionaires and billionaires, and does almost nothing for middle class and poor American families.

The tax plan does not close tax loopholes Trump promised during the 2016 presidential campaign when he said his tax plan would “get rid of the loopholes and complexity that primarily benefit the wealthiest Americans and special interests.”

RELATED: Congressional Republicans Abandon Effort to Repeal ObamaCare, Again.

Although this is a framework and is subject to modification when the actual tax code is written, the tax plan gives the biggest tax cuts in U.S. history to businesses and corporations. The plan drops corporate tax rates by a whopping 15% – from 35 percent to 20 percent.

Tax experts say that rate cut alone will cost the U.S. government nearly $2 trillion over a decade and the GOP plan does not explain how they intend to make up for the lost revenue.

For the poor, the Republican plan would raise the minimum tax rate from 10 percent to 12 percent, a 2% increase for families in the lowest rung of American society.

House Minority Leader Nancy Pelosi (D-CA) said Democrats had been willing to work with Republicans to craft a bipartisan tax bill but she blasted the GOP tax outline Wednesday morning as focused on the wealthy and super-rich.

“Republicans’ tax framework is not tax reform, it is a framework that gives away the store to the wealthiest, while sticking the middle class with the bill,” she said.

And Senate Democratic leader, Chuck Schumer of New York, branded the tax plan as a boon to wealthy Americans. He called it a “little more than an across-the-board tax cut for America’s millionaires and billionaires” that would do little, if anything, for middle-class American families.

“It seems that President Trump and Republicans have designed their plan to be cheered in the country clubs and the corporate boardrooms,” Mr. Schumer said.

He added that “under the tax plan, wealthy Americans make out like bandits while middle class and poor Americans are left holding the bag.”

A preliminary estimate from the nonpartisan Committee for a Responsible Federal Budget found that the policies in the Republican tax framework would cost the United States between $2 trillion to $2.5 trillion over a decade.

Below is how the tax cuts would affect individuals, families and corporations should it become law.

How the GOP tax plan affects individuals

The tax framework would streamline the tax brackets from the current seven to three. The proposed rates are 12%, 25% and 35% but it does not spell out the income levels for each rate. Experts say the 35% rate may not be the top rate since the framework allows legislators to add a higher bracket as they see fit, but virtually no one expects Republicans to do so.

During the 2016 presidential campaign and since becoming president, Trump touted tax reforms that he said would benefit only the middle class. The framework unveiled Wednesday doesn’t cut taxes for middle and lower class Americans, it raises them from the current 10 percent to 12 percent.

It doubles the standard deductions individuals and families are allowed take, to $12,000 and $24,000 respectively. Experts believe this would reduce the number of Americans itemizing their income taxes at the end of the year since the main reason for itemizing is to take advantage of higher deductions.

The GOP tax plan raises the child tax credit threshold from the current $1,000 for every child under the age of 17, although it leaves the amount open for legislators to determine as they write the code.

“It seems that President Trump and Republicans have designed their plan to be cheered in the country clubs and the corporate boardrooms,” Mr. Schumer said.

The plan calls for elimination of most itemized deductions including state and local tax deductions popular with residents of blue states like California while eliminating personal exemptions worth $4,050. So a middle income family of four would lose their ability to lower their taxable income by nearly $17,000.

It preserves some deductions like charitable giving, home ownership, retirement savings and higher education costs but one of the biggest giveaway to the rich comes in the form of Alternative Minimum Tax (AMT) elimination.

Alternative Minimum Tax typically affects wealthy Americans making between $200,000 and $1 million and was originally intended to ensure the wealthy pay at least some taxes. Trump and the GOP are hoping to eliminate that altogether.

It also kills the estate tax which typically affects the wealthiest 0.2% of Americans – those worth more than $5.5 million. Experts say this would allow Trump’s children to claim millions of dollars in tax-free incomes if eliminated.

How the GOP tax plan affects businesses

The plan cuts corporate taxes from 35% to 20% for businesses and drops pass-through rates for small business owners and LLCs. Trump owns over 500 LLCs and is expected to benefit handsomely from this break alone.

It recommends that legislators include measures that prevent individuals from gaming the system by changing the way they characterize their wages as pass-through profits to qualify for lower rates.

The tax plan eliminates the so-called “repatriation tax” levied on corporations with billions of dollars stashed in overseas accounts. Currently U.S. multinationals pay 35% tax on profits earned overseas when they repatriate them back to the U.S. The new plan will institute a “territorial system” which essentially eliminates the taxes altogether and allow these multinationals to pay just the tax levied by the foreign governments where the money was made.

Oregon Democratic senator Ron Wyden is not impressed by this plan saying it violates Trump’s tax pledge that his plan would not benefit the wealthy.

“If this framework is all about the middle class, then Trump tower is middle-class housing. It violates Trump’s tax pledge that the rich would not gain at all under his plan by offering sweetheart deals for powerful CEOs, giveaways for campaign coffers and a new way to cheat taxes for Mar-a-Lago’s loyal members,” Sen. Wyden said.

But Republicans are excited about the tax plan. “This framework will deliver a 21st century tax code that is built for growth, supports middle-class families, defends our workers, protects our jobs and puts America first,” said the nine-page document setting out the parameters of the tax proposal.

Thomas J. Donohue, U.S. Chamber of Commerce president said “Now, we are entering into a crucial new phase of the effort to overhaul the tax code, and the hardest work is just beginning.”

“It lays out bold provisions for middle-class families, for our local small businesses,” Texas congressman Kevin Brady, the chairman of House Ways and Means Committee, told reporters Monday. “It will deliver the lowest rates on our job creators in modern history and redesign the tax code so our companies can compete and win anywhere in the world, especially here at home.”

SEE ALSO: Democrat Cruises to Victory Against Republican Alumnus of “The Apprentice” in Florida State Senate Seat.

Republican leaders acknowledged Wednesday the tax framework would initially add to the deficit but claimed that would be offset by a strong economy. Democrats say that assertion is false citing experience with previous tax cuts.

Democrats reminded the GOP that former president Bill Clinton raised taxes in the 90s and the economy boomed while George W. Bush cut taxes for the wealthy and the economy went into a tailspin.

The tax outline was negotiated in secret by a group known as the Big Six: Gary Cohn, the top White House economic advisor; Treasury Secretary Steven Mnuchin; House Speaker Paul D. Ryan (R-Wis.); Senate Majority Leader Mitch McConnell (R-Ky.); Rep. Kevin Brady (R-Texas), chairman of the House Ways and Means Committee; and Sen. Orrin Hatch (R-Utah). No Democrats were invited into the group during negotiations.

Here is the full GOP tax plan.



Editor, The Liberal Advocate News




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