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Tax Plan Shifts Trillions From U.S. Coffers to Richest Families

Tax Plan Shifts Trillions From U.S. Coffers to Richest Families

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by: ProblemAgain Active Indicator LED Icon 10 OP 
~ 6 years ago   Apr 27, '17 11:49pm  
© Stephen Crowley/The New York Times Emoticonresident Trump and the first lady, Melania, at the White House on Thursday. Mr. Trump could benefit substantially from his tax plan, with provisions such as a repeal of the alternative minimum tax and a…WASHINGTON — President Trump’s proposal to slash individual and business taxes and erase a surtax that funds the Affordable Care Act would amount to a multitrillion-dollar shift from federal coffers to America’s richest families and their heirs, setting up a politically fraught battle over how best to use the government’s already strained resources.The outline that Mr. Trump offered on Wednesday — less a tax overhaul plan than a list of costly cuts with no price tags attached, rushed out by a president staring down his 100-day mark in office — calls for tax reductions for individuals of every income level as well as businesses large and small.But the vast majority of benefits would accrue to the highest earners and largest holders of wealth, according to economists and analysts, accounting for a lopsided portion of the proposal’s costs.“The only Americans who are very clear winners under the new system are the wealthiest,” said Edward D. Kleinbard, a law professor at the University of Southern California and former chief of staff of Congress’s Joint Committee on Taxation, which estimates the revenue effects of tax proposals.Repealing the estate tax, for example, would affect just 5,300 or so fortunes a year. For 2017, couples can shield up to $11 million of their estates from any taxation, leaving only the largest inheritances subject to taxation. Repealing the estate tax alone would cost an estimated $174.2 billion over a decade, the nonpartisan Tax Policy Center said.Reducing the rate on capital gains, noncorporate business taxes and those in the highest bracket, as well as repealing the alternative minimum tax, would also ease the burden on wealthier Americans. So would the repeal of the Affordable Care Act’s 3.8 percent surtax on the investment income of high earners, put in place to subsidize health coverage for low-income Americans.“These are all afflictions of the affluent,” Mr. Kleinbard said.There is no way to know how the mathematics of the proposal would work, since the White House offered no cost estimates, no detail about which incomes would be taxed at what levels and no information about tax deductions or other breaks that might be eliminated to make up for the lost revenue.On Thursday, Sean Spicer, the White House press secretary, suggested that tax benefits for retirement savings would be rolled back to mitigate the cost of the tax cuts, the kind of tough decision that makes a rewrite of the tax code so politically difficult. But within minutes, White House officials said Mr. Spicer had misspoken.Officials instead said specifics would come later, as negotiations unfolded with members of Congress to draft legislation.The administration’s silence on many crucial details of the proposal was by design, to leave room for what promise to be intense negotiations with lawmakers in Congress, said Rohit Kumar, the leader of PwC’s Washington National Tax Services and a former senior Republican Senate aide.Yet without specifics, he added, “you can’t make anything but a wild guess on what the distributional effects of the proposal would be.”“What the administration put out yesterday is all of the good news,” Mr. Kumar said. “They’ve withheld on the bad news.”But estimates of the impacts for some of the cuts that were outlined Wednesday, such as the estate tax and alternative minimum tax repeals, can be made, and they run directly counter to the populist themes that animated Mr. Trump’s campaign. He has often stated his concern for ordinary working men and women who he contends were forgotten under previous administrations but have risen to the top of the priority list under his leadership.Many economists who analyzed a similar plan Mr. Trump proposed during his presidential campaign found that it would have disproportionately helped the richest. William G. Gale, an economist at the Brookings Institution in Washington, estimated that just over 50 percent of the benefits of that proposal would have gone to the top 1 percent of taxpayers.The new proposal “loses probably something in the neighborhood of $5 trillion in revenue over 10 years with regressive tax cuts that exacerbate the inequalities that already exist in our economy,” said Jared Bernstein, a senior fellow at the Center on Budget and Policy Priorities who was a top economist in the Obama administration.Mr. Trump’s economic team argues that there is no disconnect; the tax reductions they are seeking, they argue, will ultimately help all Americans, including the poorest, by spurring growth that will translate into more jobs and better wages.Still, it seems almost inevitable that the blueprint, should it eventually yield legislation, would violate the vow Steven Mnuchin, the Treasury secretary, made that the administration would provide “no absolute tax cut for the upper class.”That axiom, uttered by Mr. Mnuchin in November and quickly named the “Mnuchin rule” by skeptical Democrats, was based on his insistence that any tax reductions at the top would be matched by the elimination of deductions and loopholes.“It is hard to know what the overall effects would be, but a plan that is intended to reduce taxes on business income and investment income is going to provide substantial benefits to wealthier individuals, and the bulk of the benefits in this plan would go to them,” said Ed Lorenzen, a senior adviser for the nonpartisan Committee for a Responsible Federal Budget, a fiscal policy education group. “It would probably work out to be a significant shift in the distribution of the tax code.”One major reason is Mr. Trump’s idea to allow the income of owner-operated companies, including his real estate concern, hedge funds and large partnerships, to be taxed at a 15 percent rate — the same rate corporations would pay under his plan — rather than at the individual income tax rate, which now tops out at 39.6 percent and would be set at 35 percent by Mr. Trump.That would potentially allow doctors, lawyers and others who are part of such firms to structure their compensation as business rather than personal income and effectively enjoy a substantial tax cut. The Tax Policy Center estimated last year that the proposal would cost $1.5 trillion over a decade.Higher earners also appear likely to reap the greatest benefit from repealing the alternative minimum tax, which is set at a marginal rate of 28 percent and falls most heavily on those who earn between $250,000 and $1 million. In 2013, President Barack Obama and Congress reached agreement on a “fix” that shielded middle-class families from the tax. So any repeal now would benefit wealthier taxpayers.Only a fifth of taxpayers who earn above $1 million were affected by the provision, a parallel tax system that limits the deductions and other tax breaks available to them, in part because interest and investment income are exempt.A glimpse of Mr. Trump’s 2005 tax returns revealed that the alternative minimum tax cost him roughly $31 million by setting a floor that even a stack of individual loopholes could not reduce. Repealing it would cost $412.8 billion over a decade, the Tax Policy Center has estimated.At the same time, lower- and middle-income families could be in a worse position. The White House proposes to reduce the number of tax brackets from seven to three: 10, 25 and 35 percent. But no one yet knows where the income cutoff lines are being drawn. People who end up being pushed into a lower bracket would be better off, but those kicked into a higher bracket would not be.Families with after-tax income between roughly $19,000 and $76,000, for example, are now in the 15 percent marginal tax bracket, which is slated for elimination.“That’s where the middle of America is,” Mr. Kleinbard said. While some may drop into the new 10 percent bracket, others could be nudged up into the 25 percent range.Increasing the standard deduction to about $24,000 for couples might also appear to help most families, but that is not necessarily the case, Mr. Kleinbard pointed out. Larger families, which now benefit from being able to add a deduction for every additional member of their household, could lose out.“At the bottom end, the typical family will be worse off if personal exemptions go away,” he said. 4951
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buffaloglenn Active Indicator LED Icon 11
~ 6 years ago   Apr 28, '17 8:26am  
The estate tax deal is nothing - the amount of $174Bn over a decade is a drop in the US Treasury's bucket.  Also, the concept of taxing an estate is complete BS; that's why they have a high ceiling on it to begin with.  The way this article is worded is completely slanted to the rich people get richer, poor people get poorer belief.  Notice how it says that the 15% bracket gets eliminated, hurting lower middle class families.  Then it proceeds to say that some could go down to a 10% bracket.  Guess what Einstein, that means you would pay less tax.  Then it says some "could" get nudged up to the 25% bracket.  Whoever wrote it doesn't understand jack squat about how the tax system works. 4951
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BooBear Active Indicator LED Icon 16
~ 6 years ago   Apr 28, '17 8:32am  
I love how it says the rich are taking money from the govt..no!!. Its not the govts money to begin with. The only people who are actually COSTING the govt money are those that take the earned income credit( maybe some other credits, I'm not an accountant)..we are paying them above and beyond, by thousands in many cases, what they actually paid in. 4951
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VIP Active Indicator LED Icon 1
~ 6 years ago   Apr 28, '17 8:47am  
NYT = Fake News.Just like CNN. (Clinton News Network) 4951
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ET Active Indicator LED Icon 17
~ 6 years ago   Apr 28, '17 9:02am  
I'm happy anytime somebody takes any tax away.  There are so many layers of taxation it is a real necessity to keep spending in check.  They always seem to find more of our money, anyway. 4951
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ForeCPA90 Active Indicator LED Icon 9
~ 6 years ago   Apr 28, '17 9:03am  
The estate tax debate goes back to the founding fathers, and it was as controversial then as it is now.  It was never about revenue generation, it was about preventing the transfer to and accumulation of wealth over generations.  Jefferson and Payne both felt that inheritance should be outlawed as they felt it created a nobility class and was a threat to democracy.  The estate tax originally was a compromise.  It has been eliminated and reinstated over the years.  It's not a big revenue generator today, and it affects a very small percentage of the population.  4951
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