PRESIDENT Donald Trump has been touting that he will be giving Americans a great Christmas gift when he signs the Republican tax bill into law before the holidays.
What is he talking about? Who among the American people will pop the champagne for Trump’s tax plan? Unfortunately, it will not be you and me and most hardworking Americans. It will be Trump and people like him.
Don’t take my word for it. Take it from the nonpartisan Congressional Budget Office (CBO) report that analyzed and projected the impact of the tax bill on the American people and the financial health of the nation. This is the reason why the Trump Administration continues to scramble to get enough votes even among Republicans.
The way it works is pretty much how we do our family budget. We need to work so we have the income to spend. As much as possible, we live within our means to pay our bills. If we run short of money to spend, we use our credit card or get a loan from the bank. We try to be frugal and only pay for essential basic needs, unless we need to invest on needs that will bring great return on investments in terms of better income, way of life and standard of living for our family members in the future. To save money, we either increase income/revenues and/or cut on expenses.
In looking at the tax bill issue, the GOP plan boasts of the biggest tax cuts in the history of America. As taxes are the sources of the nation’s income/revenue, then that means we have less money to spend for our needs. Spending more without the revenue to pay for it because of tax cuts means we add to our debt and budget deficit. Who benefits most from the tax break and who hurts most because of cuts in budget reflect what is important in this administration.
Based on the CBO study, the ultra-rich — the top 1 percent — will benefit most from this tax reform bill.
Who will suffer? According to the report of The Guardian based on the CBO and Joint Committee on Taxation (JCT), “starting in 2021, a year after the next election, Americans earning $10,000 to $30,000 a year or less would pay higher taxes if the bill passes thanks to plans to repeal a core element of Obama’s Affordable Care Act. The JCT also calculates that most Americans earning $75,000 or less would be paying higher taxes by 2027.”
The middle class, especially those living in high-tax states, who deduct their local property, income and sales taxes from their tax due could lose out from the complete or partial repeal of the deductions. Moreover, about 13 million Americans could lose health insurance coverage over 10 years under the Senate bill. Add to these will be the social services that benefit the poor, the vulnerable and the middle class which are always the ones slashed to spend money.
The Guardian further reported that based on the studies, “paying for the tax cuts is likely to mean cuts to social security and Medicare, the federal program that provides health insurance to those 65 and older.”
“The House bill is also proposing to eliminate tax deductions for medical expenses that exceed 10 percent of a taxpayer’s total income. More than half of the 8.6 million people who claim the deduction are older than 65, 49 percent had income less than $50,000, and 69 percent earned less than $75,000, according to AARP, the lobby group for older Americans, which has 38 million members.”
And how will this affect the economy of the United States? Contrary to Trump’s claim that this tax bill will reduce the debt and deficit of the country, the CBO estimated that this Tax Cuts and Jobs Act would cost $1.4 trillion. With the Senate version, the trillion-dollar deficit would return by 2020, debt would exceed the size of the U.S. economy in just over a decade.”
Who will celebrate if this tax bill is passed? One of the sources of our nation’s income is the estate tax. This tax bill eliminates that from the revenue column to help “people who leave a fortune of $5.49m or above to their heirs. Parents can leave $11m to their children without paying the tax. The House bill doubles that exemption until 2024 and then eliminates it entirely at a cost of $151bn to the taxpayer over the next decade.”
According to The Guardian, “The cut would save the Trump family $1.15bn when he dies, according to the Center for American Progress Action Fund.”
The Guardian further reported that with thus GOP tax bill:
“Gone also would be the alternative minimum tax (AMT), introduced in 1969 to prevent the rich from escaping paying their fair share of tax via tax loopholes.
AMT mainly affects those earning over $500,000, according to Tax Policy Center. In 2005 the rule was responsible for $31m of the $38m Trump paid in federal taxes, according to leaked documents.
Lowering taxes on pass-through businesses will also help the rich. Pass through businesses are businesses taxed at the rate of the business owner. The current proposals would cut the top rate these companies pay to 25 percent, far below the 39.6 percent highest rate of personal income tax.
According to the Center on Budget and Policy Priorities some 80 percent of the benefit of these cuts would go to those earning $1-M or more – giving them an average increase of $50,000 in 2018. A similar plan in Kansas led to a budget crisis after the state’s tax revenues plummeted and promises of increased economic activity failed to materialize.
Trump controls some 500 pass-through entities and he would save about $16m a year from the cuts, according to the New York Times.
Trump’s plan would cut the corporate tax rate from 35 percent to 20 percent, the lowest point since 1939. The idea is that lower taxes will allow business leaders to increase capital investment and create more jobs. But the fact is that most US corporations pay far less than 35 percent tax already, many of the most profitable pay nothing and lower taxes have not been shown to create jobs. There is also little evidence that the current system is harming business given that both stock markets and corporate profits are at record highs while employment is at lows unseen since the turn of the millennium.”
TELL ME: How would this bill help YOU?
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Gel Santos Relos is the anchor of TFC’s “Balitang America.” Views and opinions expressed by the author in this column are solely those of the author and not of Asian Journal and ABS-CBN-TFC. For comments, go to www.TheFil-AmPerspective.com, https://www.facebook.com/Gel.Santos.Relos