TRUMP TAX PLAN BENEFITS THE WEALTHY, INCLUDING HIMSELF

The tax plan that the Trump administration outlined on Wednesday is a potentially huge windfall for the wealthiest Americans. It would not directly benefit the bottom third of the population. As for the middle class, the benefits appear to be modest.

The administration and its congressional allies are proposing to sharply reduce taxation of business income, primarily benefiting the small share of the population that owns the vast majority of corporate equity. President Donald Trump ( pictured) said on Wednesday that the cuts would increase investment and spur growth, creating broader prosperity. But experts say the upside is limited, not least because the economy is already expanding.

The plan would also benefit Trump and other affluent Americans by eliminating the estate tax, which affects just a few thousand uber-wealthy families each year, and the alternative minimum tax, a safety net designed to prevent tax avoidance.

The precise impact on Trump cannot be ascertained because the president refuses to release his tax returns, but the few snippets of returns that have become public show one thing clearly: The alternative minimum tax has been unkind to Trump. In 2005, it forced him to pay $31 million in additional taxes.

Trump has also pledged repeatedly that the plan would reduce the taxes paid by middle-class families, but he has not provided enough details to evaluate that claim. While some households would probably get tax cuts, others could end up paying more.

The plan would not benefit lowerincome households that do not pay federal income taxes. The president is not proposing measures like a reduction in payroll taxes, which are paid by a much larger share of workers, nor an increase in the earned-income tax credit, which would expand wage support for the working poor.

Indeed, to call the plan “tax reform” seems like a stretch -Trump himself told conservative and evangelical leaders on Monday that it was more apt to refer to his plan as “tax cuts.” Trump’s proposal echoes the large tax cuts that President Ronald Reagan, in 1981, and President George W. Bush, in 2001, passed in the first year of their terms, not the 1986 overhaul of the tax code that he often cites. Like his Republican predecessors, Trump says cutting taxes will increase economic growth.

“It’s time to take care of our people, to rebuild our nation and to fight for our great American workers,” Trump told a crowd in Indianapolis.

But the moment is very different. Reagan and Bush cut taxes during recessions. Trump is proposing to cut taxes during one of the longest economic expansions in American history. It is not clear that the economy can grow much faster; the Federal Reserve has warned that it will seek to offset any stimulus by raising interest rates.

At the time of the earlier cuts, the federal debt was considerably smaller. The public portion of the debt equaled 24 per cent of the gross domestic product in 1981, and 31 per cent in 2001. In June, the debt equalled 75 per cent of economic output.