Donald Trump Tax Plan: What’s In It, And What Does It Mean For You?
Donald Trump’s tax plan (or more likely, a list of guidelines and expectations that may or may not come to reality) was released this week, and here’s a general analysis of what’s in it and what it means for the average American.
As NPR reports, the Trump tax plan is not a piece of legislation to be voted on by Congress. Rather, it’s more of a post-election campaign promise: that is, it’s a list of “guidelines” that the president wants Congress to include in any tax legislation that he would be willing to sign.
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What’s In It?
In a word (two of them, actually): tax cuts. Tax cuts across the board.
The cornerstone of the Trump tax plan is a huge reduction in the corporate income tax rate, cutting it down from 35 percent to 15 percent. Similarly, it also seeks to cut taxes on other businesses (that is, non-incorporated businesses who pay their taxes via income tax rather than corporate tax). Specifically, that spells pretty big tax cuts for small businesses as well as big corporations. And as for individuals, Americans at almost all income levels can expect a tax cut, including cuts described by NPR as “modest” for the middle class.
Another key point in Trump’s tax plan is simplification. According to Trump’s Treasury Secretary Steve Mnuchin, via Forbes, for most Americans, the arcane and interminable tax forms would be replaced by something much more simple.
“For most Americans, we think they should be able to do their taxes on a large postcard.”
How Is It Going To Be Paid For?
In theory, slashing taxes means cutting government revenue, since there’s less tax money coming in. The Trump administration hopes to offset that by explosive growth spurred on by the tax cuts.
Specifically, the Trump administration is hoping that its tax cuts would spur growth in the Gross Domestic Product (GDP) from its current levels of around 1.6 percent-1.8 percent per year to 3 percent, says Mnuchin.
“We fundamentally believe we can get to 3 percent sustained economic growth.”
Also in the mix in discussion of the Trump tax plan is a border adjustment tax or BAT. In essence, it’s an import tax on goods coming across the border. The downside to a BAT is that the tax would simply be passed on to consumers at the retail level, meaning that Americans would pay more at the check-out stand. That’s why, for now, says NPR‘s Domenico Montanaro, it’s off the table.
“That why it’s being left out, because it’s seen as too controversial right now. The last thing Trump wants is to have the narrative hijacked and turned into how he’s proposing to increase the cost of everyone’s avocados.”
Who Would Benefit
Perhaps not surprisingly, one person who would benefit greatly from Donald Trump’s tax plan is Donald Trump himself.
According to The Guardian, the Trump organization owns, manages, or is in one way or another connected to about 500 businesses. Cutting taxes on all of them would benefit Trump to the tune of tens of millions of dollars.
“Under current law, [Trump’s business’] earnings can be taxed at up to the highest personal income rate of 39.6%; under Trump’s plan, they would be taxed at 15%, equivalent to the personal tax rate of individuals earning under $37,950 a year. According to [a tax analyst], this alone could net Trump $65m a year.”
As of this writing, Trump’s tax plan is little more than a wish list and what form it takes when it is time to be signed by the chief executive remains to be seen.
Do you believe Donald Trump’s tax plan is fair and will benefit the average American?
[Featured Image by Olivier Douliery-Pool/Getty Images]
