By DUSTIN NILES
Layout & Design Editor
The Trump administration released its plan for tax reform on Sept. 27 in a document called “Unified Framework For Fixing Our Broken Tax Code” and since then, it’s been scrutinized by both sides. Here are the basic facts, as detailed in the document:
The tax plan would reduce the number of tax brackets from the current seven to three. These brackets would have marginal tax rates of 12 percent, 25 percent and 35 percent. This is to achieve President Trump’s goal of simplifying the tax code. Tax brackets are the ranges of incomes that the government uses to determine how much tax you need to pay.
The tax plan doubles the standard deduction to $24,000 for married couples ling jointly, and $12,000 for single filers. This eliminates taxes on the first $24,000 earned by a married couple and $12,000 by a single person.
The tax plan increases the Child Tax Credit, and also provides a non-refundable $500 for non-child dependents.
Under the tax plan, most itemized deductions are eliminated but “tax incentives for home mortgage interest and charitable contributions” are being kept, according to the document. The framework does not specify what those incentives would be. Other exemptions and deductions are being eliminated “to make the system simpler and fairer for all families and individuals, and allow for lower tax rates,” according to the document.
And finally, under the new tax plan, the death tax and generation skipping transfer tax would be eliminated. Those taxes apply to the transfer of an inheritance after someone’s death.
Conservative media outlets are praising President Trump for the plan, seeing it as a win for struggling families and a huge relief for small businesses. Dan Weber at Fox News said the death tax “has a devastating impact on the economy by increasing costs on small businesses … Families hit by the death tax are often forced to sell o land or valuable business assets, lay off workers, or even shut down entirely as a result.”
The death tax only needs to be led above a certain threshold, which has only risen over time. According to the IRS, if someone died in 2017, the estate tax would only need to be led if the gross estate of the dependent is greater than $5.49 million. Most Americans do not fall above this threshold.
Kyle Pomerlau from the Tax Foundation, “the nation’s leading independent tax policy research organization,” said that “a two-percent increase in the top marginal ordinary income tax rate could completely replace estate tax revenue while reducing the overall tax compliance burden.”
However, President Trump didn’t raise the top marginal tax. It was 39.6 percent for individuals making more than $418,401 in 2017. Under his plan, the top marginal tax would drop 4.6 percent to 35 percent. The tax overhaul plan’s elimination of itemized deductions would make the tax code dramatically simpler. But it’s not a panacea for the amount of money people are actually paying in taxes.
In addition to eliminating these deductions, Trump is proposing to raise the lowest tax bracket from 10 percent to 12 percent. This is mitigated by the higher Child Tax Credit and the increase in the standard deduction.
According to The New York Times, there are some other issues that need to be dealt with, such as the loophole that wealthy individuals could incorporate as pass-through businesses, which would mean they would get taxed at a 25 percent rate rather than the 35 percent set for the wealthiest Americans.
The tax code rewrite would also have significant impacts on the national de cit. According to The New York Times, studies of plans similar to President Trump’s and to a plan set forth by House Republicans in 2016, estimate that those plans “have been projected to cost $3 trillion to $7 trillion over a decade.”