One day after the failure of their latest health care plan which would have repealed the "Obamacare" Affordable Care Act, Donald Trump and congressional Republicans announced their long-promised tax "reform" plan, a massive proposed program of tax cuts and changes to the tax code that early analysis shows would benefit the wealthiest Americans by slashing the top tax rate — while increasing the rate on the lowest-income taxpayers.
But what exactly the new Trump tax reform plan would mean for you, whichever bracket you fall into as a taxpayer, remains unclear because the plan revealed on Wednesday contains no details on which Americans qualify for each tax bracket under the new code, leaving many details to be worked out later by congressional committees, according to an analysis by CBS News.
Read the full details of the Republican tax reform plan, as many details as the GOP made public on Wednesday, in the document embedded below in this article.
The plan has already come under fire from economists and political analysts for failing to include any details on how the cost of the new tax cuts and changes, which are estimated to tally well into the multiple-trillion dollar range, will be paid for, according to an analysis by Politico. A study by the conservative group Committee for a Responsible Federal Budget put the total cost of the Trump tax cuts at $2.2 trillion, while analysis by the liberal Americans for Tax Fairness (ATF) organization put the cost at more than $5 trillion.
Inevitably, the critics say, taxes on some segments of the American population and business sector will be forced to go up sharply while many coveted tax deductions will need to be eliminated in order to avoid a crippling increase to the national budget deficit. Spending on popular and effective social programs will also need to be drastically cut back, the critics predict.
While Americans currently fall into seven different tax rate brackets, the new Trump and GOP tax reform plan reduces the number of brackets to just three. While the lowest income bracket today pays a 10 percent tax rate, under the Trump/Republican plan, the lowest rate will now be 12 percent — which amounts to a 20 percent hike before deductions and other adjustments are figured in.
But the wealthiest Americans, those paying the current top personal income tax rate of 39.6 percent, will see their rate slashed to 35 percent. In raw numbers, that's a tax cut of almost 12 percent. Taxpayers in the middle income range will pay a rate of 25 percent in taxes under the new reform plan.
The new tax plan, however, remains fuzzy on many points and one of those points is the definition of each tax bracket. The plan contains no information on the income levels that each of the new tax brackets will include. For example, Americans now falling into the 15 percent tax bracket could, in theory, qualify for the new 12 percent bracket. But who qualifies for the 25 percent bracket, likely to cover the largest segment of American taxpayers, is simply not revealed in the new plan.
The vague proposal also leaves open the possibility of later adding a fourth tax bracket at the highest level, to make sure that "the reformed tax code is at least as progressive as the existing tax code and does not shift the tax burden from high-income to lower- and middle-income taxpayers," according to the wording of the Republican plan released on Wednesday, which can be read in full below.
The new tax plan also proposes giving a break to middle and lower income Americans with an increase of nearly 100 percent in the standard deduction available to all taxpayers, according to the CBS News analysis. The current standard deduction for an individual filing as a single person is $6,350, while for a marred couple filing jointly the deduction is $12,700. Under the new plan, those figures would increase to $12,000 and $24,000 respectively.
But even the new, "doubled" standard deduction is "a lie," according to an analysis by Josh Barro of the Business Insider business news site. Because the new standard deductions "consolidate" several other now-standard tax breaks for ordinary taxpayers and families into the new figures, the actual average increase in the standard deduction will be closer to 15 percent than 100 percent, Barro wrote.
Critics from both the liberal and conservative sides of the political spectrum wasted no time slamming the Trump/GOP tax reform plan on Wednesday. ATF Executive Director Frank Clemente decried the plan whose "eye-popping cost will lead to deep cuts in Social Security, Medicaid, Medicare, and public education that will leave working families in the cold," he said.
On the conservative side, former Ronald Reagan policy adviser Bruce Bartlett — who helped formulate Republican tax-cutting policies in the 1980s — said that the long-standing GOP belief in slashing taxes on the richest Americans to bring about economic growth "is now nothing but dogma completely divorced from reality."
"Virtually everything Republicans say about taxes today is a lie. Tax cuts and tax rate reductions will not pay for themselves; they never have," Bartlett wrote in USA Today on Wednesday. "Republicans don't even believe they will, they are just excuses to slash spending for the poor when revenues collapse and deficits rise. There is no evidence that tax reform raises growth."
[Featured Image by Alex Brandon/AP Images]