“ Trump’s plan will help more low-income workers to avoid taxes, not to pay income taxes.”
ACCORDING to the Tax Foundation’s Taxes and Growth Model, the Trump tax plan would increase the long-run size of the economy by 7% under a higher-rate assumption, or 8% under a lower-rate assumption. The larger economy would result in 5% higher wages and a 20% larger capital stock under the higher-rate assumption, or 6% higher wages and a 24% larger capital stock under the lower-rate assumption. The plan would also result in 1.8 million more full-time equivalent jobs under the higher-rate assumption, or 2.2 million more under the lower-rate assumption. That’s a lot of jobs.
Donald Trump’s large tax cuts impacts mostly individual and corporate income. Such cuts would significantly reduce the cost of capital and the marginal tax rate on labor. He hopes that changes in the incentives to work and invest would increase the U.S. economy’s size in the long run, boost wages, and result in more full-time equivalent jobs that translate into a larger economy.
Wealthiest: The nation’s wealthiest citizens stand to gain the most under Trump’s plan. He hopes that they will in turn expand their companies and create jobs.
Low Income: Trump’s plan will help more low-income workers to avoid taxes, not to pay income taxes. The nonpartisan Tax Policy Center found that the number of Americans who will no longer pay taxes would jump from 44% to 63%. Nice.
Simpler Tax Filing with Standard Deduction: Trump plans to double the standard deduction of single filers from $6,350 to $15,000 and joint filers from $12,600 to $30,000. This will simplify the tax process by encouraging taxpayers to use the higher standard deduction rather than a cocktail of existing exemptions and deductions.
Child Care: The new tax code would allow families to deduct child care expenses. The deduction would be available for up to four children or elderly dependents. Anyone making less than $250,000 ($500,000 if married) would be eligible to take the tax break.
Earned Income Tax Credit (EITC): Low-income workers in the non-taxable category would be eligible for an earned income tax credit of up to $1,200 annually.
Manufacturing: The Trump plan would allow firms engaged in manufacturing in the U.S. full expensing of capital investment. This annual Section 179 expensing cap would increase from $500,000 to $1 million.
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Victor Santos Sy graduated Cum Laude from UE with a BBA and from Indiana State University with an MBA. Vic worked with SyCip, Gorres, Velayo (SGV – Andersen Consulting) and Ernst & Young before establishing Sy Accountancy Corporation in Pasadena, California.
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He has 50 years of experience in defending taxpayers audited by the IRS, FTB, EDD, BOE and other governmental agencies. He is publishing a book on his expertise – “HOW TO AVOID OR SURVIVE IRS AUDITS.” Our readers may inquire about the book or email tax questions at [email protected].