Donald Trump's Tax Plan: Most Millennials would pay no Income Tax
With his intuitive tax plan, Donald Trump is reaching out to people who typically vote Democrat. If put into effect, Trump’s plan would eliminate federal income tax on over half of Hispanic couples, over 60% of the black population, and nearly half of all millennial women.
Any individual earning less than $25,000 a year and any couple earning less than $50,000 would pay no federal income tax under Donald Trump’s plan. To make up for this dramatic cut, his plan would get rid of Wall Street’s favorite loophole (hedge funds’ carried interest) and curb income deductions.
Multi-national corporations would be forced to pay a 10% tax or repatriate $2.1 trillion from overseas profits. Trump’s plan would also require American corporations in other countries to pay the U.S. federal income tax, which I think is a great incentive to keep jobs in America.
The press applauded Trump’s plan for its attention to detail, but attacked it as a major loss of government revenue (similar to how Reagan’s Tax Reform Act of 1986 was received).
While Trump’s plan cuts the highest tax rate to 25%, the removal of deductions and exemptions could mean that some people end up paying more.
Liberals may claim that tax cuts don’t benefit the economy, but according to the chairperson of Obama’s cadre of economic advisers: “Tax increases appear to have a very large, sustained, and highly significant negative impact on output…tax cuts have very large and persistent positive output effects.”
So why is the press so biased against tax cuts? According to the way tax changes used to be measured, tax cuts were almost always analyzed as being a net loss for the government.
However, a rule passed earlier this year by House Republicans changes the way alterations to the tax system are measured. The Congressional Budget Office (CBO) now uses “dynamic scoring” instead of “static scoring,” meaning that more factors are now taken into account when tax changes are evaluated. How a company will respond to the tax change in regards to investment and level of employment is now considered before changes are made to the tax system.
According to this new system, Trump’s clever plan will certainly be predicted to stimulate companies to increase investments, hire more employees, etc., in time leading to federal tax revenue.
Those who disagree with Trump’s proposition argue that it will actually increase the national debt. According to the Tax Foundation, which still uses “static scoring,” Trump’s tax plan would increase the national debt by $10 trillion over the next 10 years.
Many conservatives are worried that with an even smaller percentage of the population paying federal income tax, the government will not receive enough money to fund national defense, national parks, roadways, and important government systems.