April 27, 2017 (San Diego) During the campaign to the White House, Donald Trump promised that he was going to eliminate the deficient This is not just one of his core promises, but it is a core conservative value. To live well within one’s means. However, his one-page proposal on reforming the tax code is neither a reform or for that matter will reduce the deficit. It is, however, trickle down economics that will also benefit the very well to do.
What are the seven principles and how will they affect you, me and yes, Trump?
The first item on the package is the repeal of the Alternate Minimum Tax (A.M.T). This came to be to make sure that people who are extremely wealthy paid their fair shares. It was meant for people who though other accounting tricks avoided regular taxes. If you have never heard of the AMT, like most Americans, you would never pay it. However, in the only tax release we have from Trump, this is from 2005, he paid 25 percent of his income, instead of 4 percent. Replacing this will directly benefit him, and others in his economic class. And we must add, it is still not paid all the time.
Brackets will go down from 7 to 3. This means that it will affect people directly. Some who otherwise were in a lower bracket will find themselves in a higher bracket. This might be offset by another aspect of this proposal. This is the doubling of the standard deduction, It will double for $6.350 for individuals and double from $12,700 for couples.
It will also lower capital taxes. These are the taxes paid on investments. So you might pay some through your Individual Retirement Account, or if you have a 401K, likely this will affect those with investments in the stock exchange or funds. This is aimed at the well to do, and they will benefit.
Repealing the inheritance tax, a goal of conservatives for decades will mean that if you inherit $5,430,000, as of 2015 you will have to pay the tax. Most Americans do not have to worry about this. However, some states still have it, and those state inheritance taxes will not be touched by this change in federal laws. Will Trump and many of the members of his cabinet directly benefit from this change? Yes. So will many members of Congress.
This will also preserve deductions for charitable deductions and your mortgage. This will still benefit some members of the middle class. Chiefly, this is directed at the upper level of the income brackets.
They also intend to cut the corporate tax rate from 35 percent to 15 percent. This will bring us down from average to one of the lowest in the world. The Tax foundation says that this alone will reduce revenue for the Federal government of $2 trillion over ten years. However, the administration claims that this will be revenue neutral How? Of course, this will lead to economic expansion and growth.
In 2014 the Congressional Research Service released this report, which is indicative of where we are right now: They wrote:
Throughout the late-1940s and 1950s, the top marginal tax rate was typically above 90%; today it is 35%. Additionally, the top capital gains tax rate was 25% in the 1950s and 1960s, 35% in the 1970s; today it is 15%. The real GDP growth rate averaged 4.2% and real per capita GDP increased annually by 2.4% in the 1950s. In the 2000s, the average real GDP growth rate was 1.7% and real per capita GDP increased annually by less than 1%. There is not conclusive evidence, however, to substantiate a clear relationship between the 65-year steady reduction in the top tax rates and economic growth. Analysis of such data suggests the reduction in the top tax rates have had little association with saving, investment, or productivity growth. However, the top tax rate reductions appear to be associated with the increasing concentration of income at the top of the income distribution. The share of income accruing to the top 0.1% of U.S. families increased from 4.2% in 1945 to 12.3% by 2007 before falling to 9.2% due to the 2007-2009 recession. The evidence does not suggest necessarily a relationship between tax policy with regard to the top tax rates and the size of the economic pie, but there may be a relationship to how the economic pie is sliced.
What this has done however, is increase income inequality, which at this point is the highest since 1929. The AMT, and the inheritance tax are two mechanisms meant to alienate this concentration of wealth at the top.
Where are we regarding this:
Income disparities have become so pronounced that America’s top 10 percent now average nearly nine times as much income as the bottom 90 percent. Americans in the top 1 percent tower stunningly higher. They average over 38 times more income than the bottom 90 percent. But that gap pales in comparison to the divide between the nation’s top 0.1 percent and everyone else. Americans at this lofty level are taking in over 184 times the income of the bottom 90 percent.
This has real consequences. For starters. How long you will live will be closely determined by your zip code. If you are wealthy, chances are you will love longer than if you are poor,. We know this. In San Diego this turns to be about a decade.
This will also affect how healthy a population will be. This also explains the age of anger we live in. These policies, stated in this plan will lead to further concentration of wealth, and more anger. The question is, when will the promises made by Trump to help the little guy come to be? From the evidence presented, perhaps never. This will increase the level of disconnect, and further reduce resources to deal with public needs.