U.S. President Donald Trump wants the American working class to take his word for it when it comes to who would benefit from his administration’s plans for tax reform.
“It’s not good for me. Believe me,” the billionaire president told a crowd in Indiana on Wednesday.
Yet tax policy analysts beg to differ.
They say nine page wish list omits big details such as specifics on income thresholds for three or possibly four new tax brackets, the potential size of an increase to the child tax credit, and details about business tax provisions. That makes it difficult to determine to what extent the long-awaited plan would help the middle class.
What does seem certain, they say, is the plan would benefit Trump personally in at least two ways by getting rid of the estate tax that hits only the wealthiest Americans, and by bringing the top rate down to 35 per cent from 39.6 per cent
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“Donald Trump will benefit a great deal from the lowering of the tax, we know that,” said Michael Graetz, a former special counsel at the Treasury Department.
“We know what the benefits are for the rich through the repeal of the estate tax and the lower rates of high-income business owners through their partnerships,” he said. “But what we really don’t know much about is the nature of benefits for the middle class.”
Len Burman and his team at the Tax Policy Center are working to cost out the plan within the next few days. Another Washington tax policy research organization, the Tax Foundation, said it won’t even attempt its preliminary analysis until more details surface.
As Trump has not released his tax returns, it’s difficult to discern how the AMT would impact him. However, a line from his leaked 2005 return indicates the AMT accounted for $31.3 million in additional taxes, what the New York Times called “a vast bulk” of his federal income taxes that year.
One feature of the Republican tax proposal that could benefit the middle class is a doubling of the “standard deduction” to $12,000 for individuals. The standard deduction is the fixed-amount deduction in lieu of itemized deductions. The increase would simplify tax filing for middle-income earners.