Surprising no one, the Republicans outlined a tax plan that could mean huge tax cuts for the very rich with little or no tax reductions for the bulk of lower and middle income taxpayers. However in spite of their claimed “pro-growth” agenda, the plan included several provisions that will likely be a boon to the tax shelter industry and therefore an impediment to growth.
The giveaways in the tax plan include the elimination of the estate tax, a great benefit to the tiny portion of the population that will have more than $10 million to pass on to their children. The plan also calls for the elimination of the alternative minimum tax (AMT). This is a provision that only affects high end taxpayers. It ensures that they pay a minimal level of tax even if they have managed to effectively used loopholes to limit their tax liability. Donald Trump was subject to AMT in the one tax return which was disclosed in part.
And the tax plan lowers the top marginal tax rate from 39.6 percent to 35 percent. For a Wall Street trader type earning $2 million a year, this can mean savings of more than $50,000 a year.
We can’t know yet what the rest of us will get since they haven’t bothered to figure out where the bracket cutoffs will be. We do know is it not likely to be much.
The Republicans have touted their plan to double the standard deduction for a single individual from $6,350 to $12,700. While that sounds really generous, they are also eliminating the personal exemption of $4,050. This means that under their plan, the first $12,700 of income would be untaxed, compared to $10,400 now.
But before you spend your tax savings, you have to realize that they want to raise the bottom tax rate from 10 percent to 12 percent. Suppose you earn $40,000 a year. Under the current system you would pay a tax…