As in the song "Lawyers In Love" we have a land, a nation with too many in high places willing to do anything for money neglecting people, honor and principle but a change is coming. No more falling for the lie of living only individualistic and independent lives leaving us divided and conquerable by powerful special interests but a people, a nation collaborating for the greater common good in various groups all across the nation. A land of people working together to help one another with a vision moreover as Jesus would have us be. Love, Mercy, Forgiveness, Kindness....something about another Land. The change is coming

Sunday, February 18, 2018

The Trump/Republican Tax Plan Will Exacerbate Inequality

Trump's tax plan will cut the corporate tax rate from 35% to 15%, reduce the number of tax brackets, eliminate the Alternative Minimum Tax, or AMT, as well as the estate tax.
It would also eliminate any taxes on the first $24,000 of a couple’s earnings. And it would cut all itemized deductions, except for two big ones, mortgage interest and charitable giving.

One of the big problems with this tax plan has to do with revenues. This is a tax plan, even though we don’t know all the details yet, what we do know suggests very clearly that this is going to lead to a loss of north of at least $3 trillion to the treasury, and it could be as much as $6 trillion. That’s over 10 years. So the deficit will take a big hit. 

And there are arguments that the growth effects of these tax cuts will offset those revenue losses, those arguments are completely unfounded. There’s just not a shred of evidence, not a shred, that tax cuts pay for themselves in the totality, which is what they’re suggesting.
That’s not to say that tax cuts can’t have some growth effects, but they tend to be really quite small. So, that’s the first point. The growth point was number two.

The third point is, this tax cut plan exacerbates after-tax inequality. That means most of it's benefits accrue to those at the very top of the scale. This mostly has to do with the very sharp cut in the corporate rate and the pass-through rate Trump talks about.

With regard to this pass-through problem — this tax plan creates a huge loophole. Every high-end earner has an incentive now to become an independent business, an S Corp, an LLC, to take advantage of a pass-through rate is now going to be 15, 20 percentage points below what they would otherwise pay.

Now to the argument that these tax breaks are geared to middle-income earn earners. They are only just slightly, which is this increase in the standard deduction. So, that’s going to help some folks at the bottom.
But that’s tiny. The vast majority of the revenue losses that I was describing, the trillions that are not going to be flowing to the treasury if this tax cut ever becomes law, very much swamp anything to the middle class.

Let me give you an example. This sounds to me very similar to a House plan that was written by Paul Ryan quite recently. And with that plan, the top 1 percent, their after-tax income went up 11 percent. That’s about $240,000. OK?
The middle class, their income went up 0.1 percent, which we can just call zero. That’s 60 bucks. So that’s the kind of imbalance we’re looking at here. And that’s what I mean when I say this really exacerbates a problem we already have, which is one of high levels of inequality.

Now back to these pass-through companies and the huge tax cut that they’re going to be getting. The misleading part of this is that this is small businesses but not the mom and pops they are highlighting.
The moms and pops, you think about the corner store, they’re already paying a low rate on their pass-through income, something close to the 15 percent that we’re talking about. The ones who get the huge break here are high-end small businesses, you know, law firms and private equity funds and hedge funds.

And, again, the point here is that, if you’re being paid a high salary, which you have to pay on your personal income side, which, under their plan, would be 35 percent, you now have a very big, very tempting incentive to go to your boss and say, starting tomorrow, you’re no longer paying me a paycheck. I’m Jared Bernstein LLC, and I’m going to tap that 30 — that 15 percent loophole.

The Trump/Republican claim this is just their opening salvo but their tax plan goes completely in the wrong direction. We are a society, an economy, a government that is going to need more revenues in the future, not less. Think about demographics alone. The share of elderly people in our country is going to go from 15 to about 21 percent over the next couple of decades. Now, that’s baked in the cake. That’s going to happen.
That creates certain budgetary pressures. So, the idea that we’re even starting with an opening salvo that’s going to keep $3 trillion, $4 trillion, $5 trillion over 10 years going into the coffers at the treasury is starting from precisely the wrong place.

- Jared Berstein, Center on Budget and Policy Priorities

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