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Zippyjuan
09-27-2017, 01:10 PM
Trump had said that tax reform should be revenue neutral and should go to "working people". This will add to the deficit (won't be revenue neutral). One thing suggested was to cut the top rate for businesses but reduce deductions. This proposal is for the top rate to be reduced from 35% to 20%. One analysis (no link at the moment) I read said that for the business cut to be "revenue neutral" the lowest the rate could go would be 25%- and to offset that you would need to get rid of every single business deduction.

But this is just a proposal- Congress will have to work out the details and pass a bill. Tax reform faces huge amounts of resistance from special interest groups who want to protect their own special deductions and credits. It will be harder than healthcare to get accomplished and is at least as complicated. If brackets are reduced, don't expect to see many deductions actually cut to help pay for that meaning debt will grow faster.

While the proposal LOWERS the upper tax bracket rate, it actually RAISES the rate for the lowest tax bracket- from 10% to 12%. That is helping working class people and not helping the wealthy as he promised?

About half of all personal income tax filers owed no net tax last year so reducing taxes for the "working people" won't really do much for them. Most benefits will go to those in the upper half of incomes.


Drastically lower rates for businesses. Fewer income tax rates for individuals. A much larger standard deduction and child tax credit. A repeal of the estate tax.

CNN obtained a copy Wednesday of a Republican framework for tax reform that has been in the works for months and will finally be presented Wednesday.
The blueprint, which President Trump will discuss in a speech Wednesday, omits many critical details and numbers that congressional tax writers will now have to decide on as they draft legislation.

It's not clear yet, however, just how closely the tax-writing committees will hew to that framework since it's been negotiated behind closed doors by just six key players from the White House, House and Senate. And even that small group -- known as the Big Six -- took a long time to reach broad agreement.

How individual taxes would change

Reduce individual income tax rates: The framework shrinks the number of tax rates to just three from seven today. The proposed rates are 12%, 25% and 35%. But it will be up to the tax committees to assign income ranges to each rate.

Also, the drop in the top rate to 35% from 39.6% may not stick. The framework gives tax legislators the "flexibility" to add a fourth rate above 35% to ensure reform keeps the tax code at least as progressive as the current system.

If 35% remains the top rate, Democrats will charge that reform is just giving a big tax cut to the wealthy.

And even though the administration says it wants reform to offer middle class tax relief, the framework calls for a 12% bottom rate, which is actually higher than today's lowest rate of 10%. But typical families in the 10% bracket today "are expected to be better off" when all the changes under reform are considered together, the blueprint says.

Increase standard deduction: The plan doubles the standard deduction, to $24,000 for married couples and $12,000 for single filers.

Doing so would drastically reduce the number of people who opt to itemize their deductions, since the only reason to itemize is if your individual deductions combined exceed the standard.

Increase child tax credit: The framework calls for a "substantially higher" child tax credit, which today is worth $1,000 per child under 17. It will be up to lawmakers to determine how much higher to make it. In addition, it would raise the income thresholds for eligibility for the credit, meaning more people would qualify for it.

Get rid of valuable tax breaks: The framework proposes the elimination of most itemized deductions, including the state and local tax deduction.
It also eliminates personal exemptions, worth $4,050 per person. So a family of four could no longer reduce their taxable income by more than $16,000.
Preserve some deductions: Again without specifics, the framework calls for lawmakers to retain tax incentives for home ownership, retirement savings, charitable giving and higher education. But that doesn't mean lawmakers won't seek to modify the tax breaks that currently exist in these areas.
Repeal the Alternative Minimum Tax: The AMT most typically hits filers making between $200,000 and $1 million.

It was originally intended to ensure the wealthy pay at least some tax.

Kill the estate tax: What Republicans refer to as the "death tax" only affects about 0.2% of all estates -- and only those worth more than $5.5 million.

How business taxes would change

Cut corporate tax rate to 20%: Such a drastic drop from today's 35% rate would put the U.S. rate below the 22.5% average in the industrialized world. But doing so will be expensive. It's estimated to cost roughly $1.5 trillion over a decade.

Drop tax rates on small businesses and other pass-throughs: The top rate would be 25% down from 39.6% on the profits of so-called pass-through businesses. A pass-through passes its profits through to partners and shareholders, who then report them on their individual returns.

The framework will recommend the committees include measures to prevent gaming, in which people try to recharacterize their wages as pass-through profits to get the lower rate.

Change how U.S. multinationals are taxed: Today, U.S. multinational firms pay a 35% tax on overseas profits when they bring them back to U.S. shores. The framework calls for a switch to a "territorial system," where the overseas profits of U.S. companies would no longer be subject to U.S. tax, just to the tax of the government where the money was made.

The hope is that the new system will make U.S. companies more competitive with their foreign counterparts, and that they will use more of their foreign profits to invest and create jobs in the United States.

But to dissuade U.S. companies from artificially shifting their profits to low-tax (or no tax) havens, the framework also would impose a minimum foreign tax, though the rate is unspecifiied.

In addition, it would offer a low, one-time tax rate on existing overseas profits to entice companies to bring that money back too. It's not yet clear if the tax would have to be paid even if the money isn't brought back.

Zippyjuan
09-27-2017, 01:17 PM
https://www.cnbc.com/2017/09/27/trump-i-dont-benefit-from-gop-tax-reform-plan.html


Trump: 'I don't benefit' from GOP tax reform plan

President Donald Trump said the newly released Republican tax plan would not personally benefit him.

But a number of provisions already in the framework could save Trump and his company millions in taxes.


President Donald Trump on Wednesday said he would not personally benefit from the Republican tax reform plan unveiled Wednesday.

"I don't benefit, no," Trump replied to a reporter who asked him whether he would get a tax cut under the current framework. "My plan is for the working people, and I think very, very strongly, there's very little benefit [in it] for people of wealth."

But economists and tax experts disagreed.

"The idea that this plan would help average Americans instead of the wealthy and big corporations has been a hoax all along," Frank Clemente, executive director of Americans for Tax Fairness, told CNBC's Ylan Mui. Clemente called the plan "a big giveaway to millionaires and corporations."

And while a number of details of the plan remain to be hammered out, the initial framework contains a number of provisions that, on their face, appear to benefit either business owners or the wealthiest Americans -- Trump is both.

These include a reduction of the top individual tax rate, a repeal of the estate tax, and a massive reduction in the corporate tax rate.

Trump, the billionaire owner of a family real estate corporation, has boasted for years about how little he manages to pay in taxes, thanks to savvy accounting practices.



Of course if Trump has found enough deductions and structured his finances in the right way, it is possible he already isn't paying any income taxes which could make his statement true. Trump refused to release any of his taxes during the election as most candidates for president have done.

Another problem is that to pass tax cuts though reconciliation process (which get them that 50 vote threshold Healthcare couldn't cross), they by law they passed earlier, are restricted to "only" increasing the deficit $1.5 trillion over the next ten years. Early figures suggest that the current proposals (only a guess at this point since many important details are left off such as what levels the new tax brackets would cover) estimate it could cost $2.5 trillion over ten years. That would require raising $1 trillion in taxes from someplace else.

https://www.forbes.com/sites/anthonynitti/2017/09/27/release-of-gops-long-awaited-tax-plan-reveals-exactly-why-tax-reform-is-so-hard/#5d0842054597


Cutting tax rates is simple. As you can see, paying for those cuts is full of political landmines.If you didn't before, you should now understand why tax reform is hard. If the GOP wants to pass its plan without Democratic buy-in, it must have a net tax cut not in excess of $1.5 trillion. The net tax cuts in its proposal, however, are approximately $2.5 trillion, meaning the tax writers must find a way to generate another $1 trillion in revenue. To give you an idea of how hard that is, if we were to eliminate EVERY POSSIBLE CORPORATE TAX DEDUCTION -- save for the R&D Credit and and credit for low-income housing -- it would generate a little less than the $1 trillion needed.


The process works like so: provided the budget passed by the House and Senate builds tax cuts into to its 10-year forecast, the GOP can pass a tax reform fill that provides those cuts with a simple 51 vote majority in the Senate, rather than the standard 60 votes. And with Republicans owning 52 seats in the Senate, that should be a piece of cake, no?

No.

Because as part of the process, any tax bill passed through reconciliation must meet two standards:

It cannot exceed the tax cuts allotted for in the agreed-upon budget during the 10-year budget window, and

It cannot add to the budgeted deficit after the end of the 10-year budget window (the so-called "Byrd Rule").

Last week, the Senate agreed on a draft budget that would provide for $1.5 trillion in tax cuts over the next decade, effectively setting the mark for the GOP to aim for, because any tax reform bill that generates up to $1.5 trillion in tax cuts over the next decade -- but not a dollar more -- can be passed through the reconciliation process, provided it doesn't add to the deficit after the end of that 10-year period.

This means that the GOP has three choices:

Devise a plan that provides a total tax cut of up to $1.5 trillion over the next ten years - before accounting for any economic cuts resulting from the growth -- and pass the plan using reconciliation,

Devise a plan that provides a total tax cut in excess of $1.5 trillion over the next ten years, but make the cuts temporary so that they expire before the end of the ten-year window, and again pass the plan using reconciliation, or

Devise a plan that provides a total tax cut in excess of $1.5 trillion over the next ten years, abandon the reconciliation process, and try to cajole eight Democratic Senators to vote in favor of the plan.

Zippyjuan
09-28-2017, 01:30 PM
George W. Bush took a nearly balanced budget and promised tax cuts "to give money back to the people". Then he decided to start two major wars on top of that. By the time he left office, the deficit per year was nearly $1 trillion. Reagan's tax cuts were also supposed to stimulate the economy. There again, the deficits started to grow so not long after signing what was at the time the biggest tax cut in US history, he signed the biggest tax increase to try to reduce the growing red ink. The cuts were supposed to be covered by rising government revenues due to the economy growing faster- but the extra money never showed up. Now Trump is counting on rarely seen six percent annual growth to help offset his tax cut proposals. The US has seen such growth only twice- after WWII when Roosevelt was president and in 1982.

Do the benefits of tax cuts help everybody? Do they "trickle down"?

http://economistsview.typepad.com/economistsview/2012/09/tax-cuts-for-wealthy-linked-to-income-inequality.html


'Tax Cuts for Wealthy Linked to Income Inequality'

A report from the Congressional Research Service finds little support for the claim that tax cuts increase economic growth. They do, however, increase inequality:


Report: Tax Cuts for Wealthy Linked to Income Inequality, by Siobhan Hughes, WSJ: Just in time for the year-end debate over extending the Bush tax cuts for high earners: a new report concludes that tax cuts for the rich don’t seem to be associated with economic growth.

The report, from the Congressional Research Service, finds that tax cuts for high earners can be linked to a different outcome: income inequality.

“The evidence does not suggest necessarily a relationship between tax policy with regard to the top tax rates and the size of the economic pie, but there may be a relationship to how the economic pie is sliced,” according to the CRS report, circulated on Friday. ...

“As the top tax rates are reduced, the share of income accruing to the top of the income distribution increases; that is, income disparities increase,” government researchers said.

CRS analysts also said that “capital gains and dividends have become a larger share of total income over the past decade and a half while earnings have become a smaller share.” This phenomenon, the researchers said, suggests that labor may grab a larger share of the pie when the top individual and capital-gains tax rates are higher. ...

NorthCarolinaLiberty
09-28-2017, 01:33 PM
George W. Bush took a nearly balanced budget and promised tax cuts "to give money back to the people". Then he decided to start two major wars on top of that. By the time he left office, the deficit per year was nearly $1 trillion. Reagan's tax cuts were also supposed to stimulate the economy. There again, the deficits started to grow so not long after signing what was at the time the biggest tax cut in US history, he signed the biggest tax increase to try to reduce the growing red ink. The cuts were supposed to be covered by rising government revenues due to the economy growing faster- but the extra money never showed up. Now Trump is counting on rarely seen six percent annual growth to help offset his tax cut proposals. The US has seen such growth only twice- after WWII when Roosevelt was president and in 1982.


Source?

Zippyjuan
09-28-2017, 01:38 PM
Source?

Six percent annual GDP growth would be twice the average over the last 50 years- and only happened in one of those years.

http://www.econedlink.org/lessons/images_lessons/808_em808_figure21.jpg

http://www.econedlink.org/projector-lesson/808/

NorthCarolinaLiberty
09-28-2017, 03:16 PM
Six percent annual GDP growth would be twice the average over the last 50 years- and only happened in one of those years.

http://www.econedlink.org/lessons/images_lessons/808_em808_figure21.jpg

http://www.econedlink.org/projector-lesson/808/


Where's the FDR figure?