Trump’s tax plan helps everyone — especially the rich

Proposals are ‘ very lopsided’ toward the wealthy, expert says

Tax proposals from the Trump administration would benefit most U. S. households, small and large businesses and make filing taxes simpler, but it will provide the biggest windfall to the wealthy, experts say.

“It’s a very lopsided plan to the top end of the income scale,” says Chuck Marr, director of federal tax policy for the Center for Budget and Policy Priorities.

For consumers, one of the biggest changes — and one of the least- surprising proposals — would be if Trump’s plan to streamline the current seven tax brackets to three — 10%, 25% and 35% — passes. In the plan, which he touted during the presidential race, the top rate would drop to 35% from 39.6%. The administration has not said which income ranges would apply to those brackets.

Alan Viard, resident scholar at the American Enterprise Institute, says administration officials will almost certainly ensure that no one pays a higher rate for the same income. Yet the elimination of most deductions could nudge some wealthier Americans into higher brackets, he says.

Overall, Marr notes the Tax Policy Center has estimated that the top 1% of households would see a 14% increase in after- tax income, while low and middleclass Americans would see gains of just 1.2% to 1.8%.

Trump’s plan also would eliminate a 3.8% tax on the interest, dividends and capital gains of higher- income households that help fund the Affordable Care Act, or Obamacare, that the president

has so far failed to repeal and replace, as promised.

Other notable components:

The standard deduction, currently $ 6,350 for single people and $ 12,700 for married couples, would double. As a result, many low- to moderateincome families would pay no taxes. But all other deductions, except for mortgage interest and charitable contributions, would be eliminated, including state and local taxes and for medical expenses.

Marr says scrapping the state and local deduction would have the biggest effect and would largely hurt Americans in “blue,” or Democratic, states on the coasts that pay higher state and local tax rates.

About 70% of Americans, mostly lowto moderate- income, currently take the standard deduction and would benefit, Viard says. Many of the remaining 30% who itemize, largely higher- income households, would likely switch to the standard deduction, leaving only about 5% itemizing, he says. Some wealthier Americans could end up paying higher taxes, though most would save.

The estate tax, or so- called “death” tax, would be scrapped. The 40% tax currently applies to a $ 5.5 million inheritance for individuals and $ 11 million for married couples.

The alternative minimum tax, which generally hits households with incomes of at least several hundred thousand dollars — would be ditched. The current rate is 28% for income that qualifies, and it hits individuals who otherwise would benefit from a sharply lower effective tax rate because of deductions.

Marr calls this another gift to the wealthy.

Corporate tax rates would drop to 15% from the current 35%. The plan also would reduce the business income rates paid by so- called passthrough businesses — including many small businesses formed as partnerships and limited liability companies — to 15%.