The first fact to remember about the Republican tax plan is that what is eventually passed by Congress will be different than what was introduced today. How different we don’t know, but it will be different.
The Daily Signal posted an article today highlighting some of the proposed plan. The plan would simplify taxes, lower income tax rates, and positively impact business taxes.
The article reports:
The tax reform package would simplify and lower the current tax rate structure, from seven different rates ranging from 10 percent to 39.6 percent, to four rates: 12 percent, 25 percent, 35 percent, and 39.6 percent.
Most low- to middle-income earners would face lower marginal tax rates, which would help encourage more work and also put more money back into taxpayers’ pockets to spend more productively than the federal government.
Unfortunately, the plan maintains the top marginal rate of 39.6 percent (which reaches 43.4 percent when factoring in the Obamacare surtax).
While only 1 of every 150 taxpayers actually pays the top rate, more than 1 of every $5 of taxable income is subject to that tax rate. That means a lot of economic activity is affected by the top rate, and lowering it would have a significant and positive impact on investment, productivity, incomes, and job growth in the U.S.
Maintaining a high top rate for wealthy Americans may make the plan more politically palatable, more appealing to average Americans, and help reduce the alleged “costs” of the tax reform plan. In reality, though, it would not result in nearly as much revenue as static estimates project, and it would limit the plan’s ability to maximize job growth and boost incomes for everyday Americans.
One aspect of the tax plan that is going to meet with a lot of resistance is the change to state and local tax deductions.
The article explains:
The proposed tax plan would partially eliminate state and local tax deductions by getting rid of the deduction for income or sales taxes, and by capping the deduction for property taxes at $10,000.
State and local tax deductions provide no economic benefit. In fact, they are outright detrimental to the economy.
By allowing those who itemize their taxes to deduct property taxes as well as income or sales taxes they pay to state and local governments, these deductions shift the burden of high-tax states onto low-tax states, and spread a portion of high-income earners’ taxes onto lower- and middle-earners’ tax bills.
For example, just seven states (California, New York, New Jersey, Illinois, Massachusetts, Maryland, and Connecticut) receive more than 50 percent of the value of the state and local tax deductions.
And on net, the average millionaire receives 102 times as much benefit from the state and local tax deductions as a typical household that makes between $75,000 and $100,000.
Eliminating the sales and income tax deductions would be a huge benefit to at least 85 percent of Americans.
Please follow the link above to read the entire article. It explains how each part of the tax plan would impact families in all income brackets. What we are hearing in the mainstream media is not necessarily accurate.