President Trump has a new tax plan in the works, but the specifics are vague, to say the least. News outlets are already buzzing with what we do know, however, and which income level will most benefit from the changes, should they go through.
The plan would reduce the current seven tax brackets to three, with the possibility of adding a fourth. Taxpayers would be paying 12%, 25%, or 35%. Congress will also have the choice to add a fourth, higher-paying bracket. No information regarding which income levels would fit into which category has been released.
According to the president’s chief economic advisor, Gary Cohn, the tax plan “is purely aimed at middle-class families.” A family of four earning $55,000 could expect a tax decrease of 650-1,000, Cohn said. However, he was hesitant to guarantee that no middle-class family would receive a tax increase.
Families with children under 17 may or may not see improvements in their tax credits as well. Currently, they can receive up to $1,000.
As far as details on how the government intends to pay for the Trump tax plan, no details were forthcoming beyond some broad suggestions regarding economic growth resulting from corporate tax cuts.
Bruce Bartlett, domestic policy advisor to President Ronald Reagan, is skeptical of the outcomes of these tax changes as presented by Trump and his administration. Based on his time with Reagan, Bartlett notes a basic misunderstanding of Republican lawmakers when it comes to believing that tax cuts will improve economic growth. In Bartlett’s experience “there’s no evidence that a tax cut now would spur growth.” The relative prosperity of the Reagan era was due in large part to the bounce back from the recession of 1981-82 rather than solely tax cuts. Bartlett also questions just how significant that bounce-back really was.
“Republicans’ various claims [about tax cuts] are irreconcilable,” Bartlett concludes. “One is that the rich will not benefit even though it is practically impossible for them not to—those paying the most taxes already will necessarily benefit the most from a large tax cut.”
Writing for The Seattle Times, Josh Boak found experts with similar opinions about the Trump tax plan. According to analysts, Boak writes, “the government would have to help pay for the tax cut by slashing programs that serve the middle class. Or it would be forced to run the national debt up to dangerous levels, likely driving up borrowing rates for consumers and businesses.”
With details still up in the air, it remains to be seen what effect the Trump tax plan would have on the economy. As it stands, however, it doesn’t look good for anyone other than the upper class.