For some in mid­dle class, Trump plan would mean tax in­crease

Daily Local News (West Chester, PA) - - BUSINESS - By Christo­pher S. Ru­gaber

Pres­i­den­t­elect Don­ald Trump’s pro­pos­als would mod­estly cut in­come taxes for most mid­dle-class Amer­i­cans. But for nearly 8 mil­lion fam­i­lies — in­clud­ing a ma­jor­ity of sin­gle-par­ent house­holds — the op­po­site would oc­cur: They’d pay more.

Most mar­ried cou­ples with three or more chil­dren would also pay higher taxes, an analysis by the non­par­ti­san Tax Pol­icy Cen­ter found. And while mid­dle-class fam­i­lies as a whole would re­ceive tax cuts of about 2 per­cent, they’d be dwarfed by the wind­falls av­er­ag­ing 13.5 per­cent for Amer­ica’s rich­est 1 per­cent.

Trump’s cam­paign rhetoric had pro­moted the ben­e­fits of his pro­pos­als for mid­dle-in­come Amer­i­cans.

“The largest tax re­duc­tions are for the mid­dle class,” said Trump’s “Con­tract With the Amer­i­can Voter,” re­leased last month.

The tax hikes that would hit sin­gle par­ents and large fam­i­lies would re­sult from Trump’s plan to elim­i­nate the per­sonal ex­emp­tion and the head-of-house­hold fil­ing sta­tus. These fea­tures of the tax code have en­abled many Amer­i­cans to re­duce their tax­able in­come.

His other pro­posed tax changes would ben­e­fit mid­dle- and lower-in­come Amer­i­cans. But they wouldn’t be enough to off­set those mod­i­fi­ca­tions.

“If you’re a low- or mod­er­ate-in­come sin­gle par­ent, you’re go­ing to get hurt,” said Bob Wil­liams, a fel­low at the Tax Pol­icy Cen­ter.

Un­like Trump’s po­lar­iz­ing pro­pos­als on im­mi­gra­tion and trade, his tax plan is in line with tra­di­tional Repub­li­can pol­icy. His steep tax cuts in many ways re­sem­ble those car­ried out by Pres­i­dents Ron­ald Rea­gan and Ge­orge W. Bush, and the Repub­li­can­run Congress is ex­pected to wel­come them.

Dur­ing the cam­paign, Trump said his tax cuts — for in­di­vid­u­als and com­pa­nies — would en­er­gize the econ­omy by boost­ing busi­ness investment in fac­to­ries and equip­ment, while leav­ing con­sumers with more cash to spend. His pro­pos­als, he con­tended, would help cre­ate 25 mil­lion jobs over the next decade.

But Lily Batchelder, a vis­it­ing fel­low at the Tax Pol­icy Cen­ter and for­mer deputy di­rec­tor of Pres­i­dent Barack Obama’s Na­tional Eco­nomic Coun­cil, es­ti­mates that roughly 7.9 mil­lion fam­i­lies with chil­dren would pay higher taxes un­der his pro­pos­als. About 5.8 mil­lion are led by sin­gle par­ents. An ad­di­tional 2.1 mil­lion are mar­ried cou­ples.

Other an­a­lysts, in­clud­ing economists at the con­ser­va­tive Tax Foun­da­tion and right-of-cen­ter Amer­i­can En­ter­prise In­sti­tute, have agreed with Batchelder’s con­clu­sions.

Here’s what her analysis finds:

Right now, a sin­gle par­ent with $75,000 in in­come and two chil­dren can claim a head of house­hold de­duc­tion of $9,300, plus three per­sonal ex­emp­tions. Those steps would re­duce the house­hold’s tax­able in­come by $21,450, to $53,550.

Trump’s plan would more than dou­ble the stan­dard de­duc­tion to $15,000. But that change would be out­weighed by his elim­i­na­tion of per­sonal ex­emp­tions and head-of-house­hold sta­tus. So the fam­ily’s tax­able in­come would be $60,000, and their tax bill would be $2,440 more than it is now.

A mar­ried cou­ple with four chil­dren and in­come of $50,000 would ab­sorb a tax in­crease of $1,090 be­cause of their loss of per­sonal ex­emp­tions.

Trump’s ad­vis­ers deny that he will raise taxes on mid­dle-in­come Amer­i­cans. Stephen Miller, his top pol­icy ad­viser, said Trump would pro­vide tax-free child care sav­ings ac­counts and other pro­vi­sions to en­able some fam­i­lies to re­duce taxes.

But Batchelder’s analysis found that those pro­vi­sions wouldn’t be enough to off­set the plan’s other el­e­ments that would in­crease taxes for some mid­dle in­come house­holds.

More broadly, Miller said Trump would in­struct Congress to avoid rais­ing taxes on those fam­i­lies.

“We will cut taxes mas­sively for the mid­dle class and work­ing class,” Miller said.

Kelly Ro­driguez, 47, who lives in Tampa, Florida, voted for Trump and is a sin­gle mother who claims two of her four chil­dren as de­pen­dents. (Her ex-hus­band claims the other two.) She made roughly $90,000 last year, in­clud­ing al­imony pay­ments. Her taxes would likely rise un­der Trump’s plan, ac­cord­ing to Batchelder’s analysis.

“I would want him to ex­plain that to me,” she said. “Taxes have to make sense to the peo­ple pay­ing them.”

Still, Trump’s plan will likely evolve dur­ing con­gres­sional ne­go­ti­a­tions be­fore it be­comes law.

“This is not any­where close to a fi­nal plan,” Wil­liams said.

Kyle Pomer­lau, di­rec­tor of fed­eral projects at the con­ser­va­tive Tax Foun­da­tion, noted that House Speaker Paul Ryan’s own tax-cut pro­posal is sim­i­lar to Trump’s but wouldn’t raise taxes on sin­gle-par­ent fam­i­lies. In the­ory, the two plans could be melded, and Trump’s elim­i­na­tion of the head of house­hold sta­tus could be dropped.

But leav­ing the head of house­hold fil­ing sta­tus and per­sonal ex­emp­tions in­tact would lower tax rev­enue by $2.1 tril­lion over the next decade, the Tax Pol­icy Cen­ter says.

All in­de­pen­dent analy­ses show most of the ben­e­fit of Trump’s plan flow­ing to the wealth­i­est Amer­i­cans. Nearly half of Trump’s tax cuts would go to the top 1 per­cent of earn­ers, the Tax Pol­icy Cen­ter found. Less than a quar­ter of the cuts would ben­e­fit the bot­tom 80 per­cent.

Trump pro­poses to re­duce the num­ber of tax brack­ets from seven to three, with rates of 12 per­cent, 25 per­cent and 33 per­cent. That would slash the top rate from the cur­rent 39.6 per­cent. He would re­peal the es­tate tax, which af­fects only about 0.2 per­cent of es­tates — those worth above $5.45 mil­lion.

For mid­dle-in­come earn­ers as a whole, the Trump pro­pos­als would cut taxes, even tak­ing into ac­count the in­creases on sin­gle-par­ent fam­i­lies. Those earn­ing nearly $50,000 to about $83,000 — the mid­dle one­fifth — would re­ceive an av­er­age cut of $1,010, ac­cord­ing to the Tax Pol­icy Cen­ter. That would lift their af­ter­tax in­comes 1.8 per­cent.

By con­trast, the wealth­i­est 1 per­cent — those earn­ing over $700,000 — would en­joy a tax cut av­er­ag­ing nearly $215,000, boost­ing their af­ter-tax in­comes 13.5 per­cent. And the rich­est 0.1 per­cent — those mak­ing above $3.7 mil­lion — would re­ceive a bo­nanza: An av­er­age tax cut ex­ceed­ing $1 mil­lion.

“Trump’s cam­paign rhetoric may have been pop­ulist, but his tax plan isn’t,” Howard Gleck­man, a se­nior fel­low at the pol­icy cen­ter, wrote on its web­site.

His tax pro­pos­als sug­gest what may be a chal­lenge for Trump’s ad­min­is­tra­tion: Pro­vid­ing his mid­dle- and work­ing-class sup­port­ers with tan­gi­ble signs of eco­nomic progress. Mid­dle-in­come Amer­i­cans al­ready pay a rel­a­tively mod­est share of fed­eral in­come taxes com­pared with the wealthy. That lim­its the scope of what tax cuts could do for them.

“The thing that he needs to worry about is mak­ing life bet­ter for his sup­port­ers, and that in­volves more than tax cuts,” Wil­liams said.

Mid­dle class fi­nances have also been squeezed by high and ris­ing costs for health care, higher ed­u­ca­tion and hous­ing, noted Joseph Co­hen, a so­ci­ol­o­gist at Queens Col­lege in New York City.

“We’ve been cut­ting taxes since Rea­gan, and things have been get­ting worse for the mid­dle class since Rea­gan,” he said.


Pres­i­dent-elect Don­ald Trump speaks Nov. 10 dur­ing his meet­ing with Pres­i­dent Barack Obama in the Oval Of­fice of the White House in Wash­ing­ton. Trump promised big tax cuts for the mid­dle class, but for nearly 8 mil­lion fam­i­lies, the op­po­site would oc­cur: They’d pay more.

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