President-elect Donald Trump’s tax plan unveiled in November keeps a campaign promise to lower income taxes across the board … almost. The upper 1 percent would receive a whopping 47 percent of the tax break. Those in the lowest income tax bracket, earning under $19,625 per year, would face a 20 percent increase in taxes.
In addition, according to the Tax Policy Center and the Brookings Institute, the following groups face tax increases:
51 percent of single-parent households
8 percent of married, filing jointly
32 percent of black households
24 percent of Latino or Hispanic households
19 percent of white non-Hispanic households
Lily Batchelder, Majority chief tax counsel for the Senate Finance Committee, has found that as many as 20 percent of households with dependent children and over half of single parents would see a tax increase.
Trump’s plan makes three tax brackets, 12 percent, 25 percent,and 33 percent, in place of the seven brackets we have now. Those in the lowest group currently pay 10 percent. Students, who often work in near minimum wage jobs and find themselves in that lowest group, would find a substantial increase in their income tax liability.
Stephen Miller, the Trump campaign policy director, rejects the Tax Policy Center analysis. He cites a $500 offset for families who put $1,000 in dependent care savings accounts. The Tax Policy Center noted that it is difficult to assess how many such accounts would be created and also pointed out that for many families the offset would still not
cover the tax increase. And students, in any case, often having no dependents, would not qualify. So the original Tax Policy Center figures would still apply for them.
The theory for cutting taxes on corporations and the wealthy is the old “trickle down” chestnut. Give money to the “job creators” and they will create jobs. Except that this supply-side economic theory has never in the history of the world worked that way.
It’s actually just the opposite.
Businesses create jobs when a market exists for what those businesses produce. Markets exist when consumers have money to spend.
In reality, a money incentive to create or expand businesses already exists with the low-interest rates that have been in effect for several years. Expanding businesses through loans is now as cheap as ever. Yet, the kind of broad expansion that creates jobs has not taken place because a rise in broad consumer spending has been slow. It’s
fine to reduce expenses, but it’s money coming through the front door that makes a business healthy.
As Sen. Bernie Sanders pointed out during his campaign, the lion’s share of all new wealth created in the last decade has gone to the “1 percent” …even so, they can’t buy everything. Consumers, the real job creators, are still struggling just to make ends meet.
Trump promises to help job growth by increased spending on infrastructure. But where will the money come from? Even if Trump’s rosy expectations are realized of luring overseas U.S. businesses back to the mainland with tax incentives, the conservative Tax Foundation estimates that tax revenues would be decreased by $10.14 trillion over
the next decade. That’s more than a trillion dollar decrease per year.
That kind of decrease is not possible even with current government spending, let alone a spending increase for infrastructure. The only way it can be done is by borrowing. Assuming lenders could be found, borrowing on that scale would raise deficits astronomically. Such a rise would not only be a disaster for all of us now, but for future