In less than a year of being in the white house Trump supporters are now fully doubting their elected president, his campaign promises of taking on the corrupt establishment seems to have disappeared into thin air. Now, with his proposed tax plan, he wants to do a reverse Robin Hood – steal from the poor and give to the rich.
This latest proposal is just one in the slew of hilarious proposals that have come from the Trump Presidency. It is also one more nail to add to the coffin of his presidency, ultimately leading to his impeachment.
Who does the Tax Plan Benefit?
President Trump’s tax plan was initially named the “cut cut cut Act” although it has now been reformed to the saner “Tax Cut and Jobs Act”. Still, it just points to the fact that the proposed tax plan has a lot of tax cuts – for the rich.
According to Politifact.com, a non-partisan website, 80% of the tax cuts in the proposed tax plan would benefit the top 1% by the 10th year of the plan. However, it seems that the cuts in this tax plan only apply to the wealthy. In 2018, middle income households are going to get an average tax break of $660. However, by 2027, more than one in every four middle-income families are going to pay more taxes than they presently do.
Eliminating estate tax
One of the ways President Trump hopes to favor the top 1% is by eliminating the estate tax. This is the tax the US government collects on inherited property. As it stand, the inherited wealth is a tool for widening inequality and creating a modern day American aristocracy. So, it is only fair that the US government taxes the wealth of the top 1% to run the state for everyone.
Sadly, President Trump, in his perceived wisdom, moves to eliminate the estate tax.
However, what President Trump and his cronies fail to mention is that estates currently get a tax break. Upon death, assets are written off to the higher market value or cost. This means that heirs do not pay any capital gains tax.
For example, if you buy a share at $10 and it rises to $100, you owe capital gains tax on the $90 profit. However, if your heir sells the stock at $100, there is no capital gains tax on the profit.
Before President Trump’s tax plan, this loophole has been checked by the estate tax. If the Trump tax plan sails through, there would be no capital gains tax for the top 1%, and there will be no estate tax.
To put this in proper perspective, imagine that two people own an asset at the same cost. One person makes a sale on the deathbed, while the other’s asset is sold on his demise. While the deathbed sale would be largely subjected to normal taxation, the inherited asset would have no capital gains tax or estate tax.
The Problem of Carried Interest
Another handout to the rich is President Trump’s refusal to fulfil his campaign promise to kill the loophole for carried interest. Carried interest is a term used to describe the fee income earned by hedge funds and other similar entities.
In the present tax code, this is treated as capital gain rather than income, meaning that they get a far lesser tax rate. This is despite the fact that the income the hedge fund managers earn is not from their own assets but on other people’s investment. Leaving things as they are is just an extra benefit to the top 1%.
Who benefits from the tax cuts?
President Trump and his supporters say that a major advantage in the tax plan is the slashing of corporate tax rate from 35% to 20%. According to them, this will encourage American corporations to repatriate their profits and invest in the US economy, leading to more jobs and wage increase.
However, history has shown that this is just another way to benefit the top 1%. For instance, when George Bush enacted a tax repatriation holiday, the effects were disappointing. When the Senate studied the impact of the holiday in 2011, the results were not palatable:
“The report looked at the top 15 repatriating companies and found that, instead of spurring jobs and economic stimulus, the tax break was instead associated with increased corporate stock buybacks and executive pay. The report also observed that the 5.25% tax rate created a competitive disadvantage for domestic businesses that chose not to engage in offshore operations or investments, and provided a windfall for multinationals in a few industries without benefitting the U.S. economy as a whole.”
“There is no evidence that the previous repatriation tax giveaway put Americans to work, and substantial evidence that it instead grew executive paychecks, propped up stock prices, and drew more money and jobs offshore.”
In August, the Institute of Policy Studies looked at the US companies that paid the lowest tax rate. If there is wisdom in what President Trump suggests, these companies should pay higher wages and hire more workers. Instead they discovered that:
“Our calculations have revealed that the 92 firms [that pay a tax rate of 20% or less] in our sample had median job growth during this period of negative 0.74 percent, compared to the 6 percent job-growth rate of U.S. private sector firms as a whole.”
All this goes to show that when given huge tax breaks, corporations do not hire more workers or increase existing wages. Instead, they give their CEOs fatter paychecks.
Who Pays for the Tax Plan?
The US government surely needs funds to keep on running. Since the tax cuts and other features of the tax plan have taken a chunk of US revenue, where does the Trump government get its funds? The answer is straightforward, the middle class and other hard working Americans.
President Trump plans to fund his tax cuts and exemption by adding extra burdens on a hardworking class of Americans – students. The tax plan proposes to remove tax deductions on student loans. This is in addition to the other horrible ways the tax plan burdens this demographic.
A headline in the New York Times describing the plight of students read, “The House Just Voted to Bankrupt Graduate Student”. The plain irony is that this is impossible since students can’t declare bankruptcy for their student debts. This in a country where billionaires like Trump can declare bankruptcy six times. A country where the Fed can spend $29 trillion bailing out corporations that caused the 2008 financial crisis.
Slash Medicare and Medicaid
The Trump administration has also targeted another vulnerable demographic to help fund its tax plan. It plans to cut $473 billion from Medicare in the next 10 years. A painful blow to about 55 million Americans who depend on this program to take care of health care costs.
President Trump also applauds the budget cuts of over a $1 trillion from Medicaid within the next decade. This is the height of cruelty. Medicaid is a lifeline for about 77 million Americans. Most of them poor, disabled, children, or senior citizens. All just to make the rich get richer.
Eliminating local and state tax deduction
President Trump also plans to fund his tax cuts by ending federal tax deductions for local and state taxes. This means that Americans would be taxed double on the same earnings. For instance, if you pay a $1,000 tax to Sacramento, you’ll still owe $300 to the feds, on money that is already gone.
President Trump’s proposed tax plan is just the latest in his series of failings to the American people. His proposed health care plan was also a terrible contraption that was thankfully not allowed to see the light of day. Hopefully, this proposed tax plan goes that way.
The road to impeachment
Over time, President Trump’s series of blunders will lead him to his deserved destination – away from the White House. He seems to be one step closer to this. In the past week Michael Flynn, a major member of Trump’s campaign team and former national security adviser, pleaded guilty to lying to the FBI about his contact with the Russians in the lead to the elections.
With Michael Flynn’s cooperation, special counsel Robert Mueller will be able to uncover Donald Trump’s collusion with Russia – an enemy state – to bring him into power. In the end, the people of the United States will see Trump for what he is, and he will be impeached.
You can lend your voice to the calls for President Trump’s impeachment by signing our petition. Add your voice to more than 266,000+ others who don’t want to see this man drag our beloved country into the abyss.