Trump Unveils Major Tax Change Proposals
The trouble with having a billionaire business man in the White House is that it becomes next to impossible to view his tax policies other than through the lens of how he stands to gain from them.
The headline announcement of Donald Trump’s plans to reform the US tax system (which few would defend as being anywhere near simple or perfect) is his plan to slash corporate tax from its current level of 35% to 20%. When first mooted, it was quickly calculated that the President stood to see his plan net him a cool $200 million. This makes it difficult to argue that the changes are a dispassionate decision in the interests of US business and wider society, even if it is.
Critics of the move caution that the reduction would deprive the Treasury of approximately $2.2 trillion over a decade. Unless this hole is filled by a significant expansion of business activity, it would mean that Federal expenditure must be cut back to compensate or the national debt expanded to accommodate it via fresh borrowing. The Administration suggests that much of this shortfall will be recouped by the closure of tax loopholes.
Other aspects of the plan include a near doubling of individual and family tax deductions to $12000 and $24000 respectively; increased tax credits for children and the introduction of a tax credit for adult dependents and the elimination of inheritance tax (again, Mr Trump’s children would benefit from this enormously if, God forbid, he were to expire). Changes to tax on overseas profits and an upper tax rate of 25% for firms established as “pass-through entities” which could be engaged in tax avoidance activities (which are perfectly legal).
Mr Trump noted: "Our country and our economy cannot take off like they should unless we dramatically reform America's outdated, complex and extremely burdensome tax code". One could be forgiven for thinking that America had never had a Republican government before.
The reforms and the fallout from them will be contentious and they may face a difficult passage through the legislature.