Devil in the de­tails for Repub­li­can tax plan

Philadel­phia re­gion has mixed re­ac­tion to tax re­form pro­posal

Daily Local News (West Chester, PA) - - FRONT PAGE - By Brian McCul­lough bm­c­cul­lough@21st-cen­tu­ry­media.com @wc­dai­ly­lo­cal on Twit­ter

Re­gional re­ac­tion to a tax re­form pro­posal was pre­dictably mixed the day af­ter Pres­i­dent Don­ald Trump an­nounced it, with pro-busi­ness groups and Repub­li­cans singing its praises while Democrats and some economists urged cau­tion un­til de­tails are pro­vided.

“The doc­u­ment re­leased by the ad­min­is­tra­tion and con­gres­sional Repub­li­cans con­tains mas­sive tax cuts for the su­per­rich, big cor­po­ra­tions and Wash­ing­ton spe­cial in­ter­ests, which won’t cre­ate jobs or grow in­comes for mid­dle class fam­i­lies,” said Penn­syl­va­nia’s Demo­cratic Sen­a­tor Robert Casey. “In or­der to fi­nance tax cuts for the su­per-rich and big cor­po­ra­tions, this pro­posal from Repub­li­cans in Wash­ing­ton would add $1.5 tril­lion to our deficit, which could lead to cuts to So­cial Se­cu­rity, Medi­care and Med­i­caid.”

The state’s Repub­li­can Sen­a­tor Pa­trick Toomey was ef­fu­sive in his praise for the plan, which is dubbed the “Uni­fied Frame­work For Fix­ing Our Bro­ken Tax Code” by Con­gres­sional Repub­li­cans and the White House:

“There’s noth­ing nor­mal about 2 per­cent growth for the United States of Amer­ica,” Toomey said. “We’re ca­pa­ble of so much more. When we get this right, I am con­fi­dent that we will achieve ro­bust growth. What that means for the hard­work­ing fam­i­lies that I rep­re­sent all across Penn­syl­va­nia is a di­rect pay raise when we lower their di­rect tax bur­den. It also means an in­di­rect pay raise as more jobs are cre­ated and more busi­nesses are launched. Upward pres­sure on wages al­lows peo­ple to have a higher stan­dard of liv­ing.”

The sweep­ing plan would deeply cut levies for cor­po­ra­tions, sim­plify ev­ery­one’s tax

brack­ets and nearly dou­ble the stan­dard de­duc­tion used by most Amer­i­cans. How­ever, the mea­sure is ex­pected to face strong op­po­si­tion from Democrats who con­tend it is tilted too much to the wealthy and would ex­plode fu­ture deficits.

“Our coun­try and our econ­omy can­not take off like they should un­less we dra­mat­i­cally re­form Amer­ica’s out­dated, com­plex and ex­tremely bur­den­some tax code,” Trump told a crowd in In­di­ana on Wed­nes­day, urg­ing them to lobby Congress to win pas­sage of the first ma­jor re­vamp of the na­tion’s tax code in a gen­er­a­tion.

Guy Ciar­roc­chi, pres­i­dent and CEO of the Ch­ester County Cham­ber of Busi­ness & In­dus­try, said his or­ga­ni­za­tion would work with many other busi­ness sup­port groups across the na­tion to get tax re­form legislation passed by the Repub­li­can­con­trolled Congress.

“We will be work­ing tire­lessly to make tax re­form a re­al­ity,” Ciar­roc­chi said. “This plan will make fil­ing taxes eas­ier and sim­pler. And, re­duc­ing rates and re­form­ing the IRS will not only bring about fair­ness to small busi­nesses, it will also en­cour­age job creation and higher wages. There is no more im­por­tant pri­or­ity for our cham­ber.”

The cham­ber is one of 239 pro-busi­ness groups from across the na­tion to sign a let­ter sent to mem­bers of Congress in sup­port of tax re­form.

“It has been 31 years since Congress last re­formed the tax code,” the let­ter reads in part. “Since then, the code has be­come an an­chor weigh­ing down the econ­omy, job creation and wage growth for Amer­i­can fam­i­lies. This Congress has a once-in-a-gen­er­a­tion op­por­tu­nity to fix the prob­lem.”

But ex­actly how the plan will af­fect tax­pay­ers re­mains an un­known since it will be up to Congress to work out the de­tails.

Joel Naroff, an econ­o­mist from Hol­land, Pa., who of­ten writes col­umns for Dig­i­tal First Me­dia news­pa­pers, said in­di­vid­u­als with the same in­comes could have dif­fer­ent ex­pe­ri­ences with the pro­posed re­forms.

“This is a case where the in­di­vid­ual mat­ters —and that means you re­ally need an ac­coun­tant to parse the op­tions,” Naroff noted. “That said, there are win­ners and losers that can be iden­ti­fied in gen­eral. They de­pend on the types of de­duc­tions taken as well as the level of in­come. On the per­sonal side, do your de­duc­tions ex­ceed or are they be­low the new stan­dard de­duc­tion. If it is be­low, you switch from item­iz­ing to tak­ing the stan­dard de­duc­tion and you make out well. But what if it is above and you got there us­ing the state and lo­cal tax de­duc­tion, you will likely pay more be­cause you can­not use the state and lo­cal tax de­duc­tion.

“Penn­syl­va­nia tends to­ward the higher level for state and lo­cal taxes, so this could be a prob­lem, po­ten­tially a large one, for many (Penn­syl­va­nia) res­i­dents,” Naroff said. “The point here is that two fam­i­lies with the same in­come but dif­fer­ent cir­cum­stances could find the tax changes raise or lower their taxes. Thus, in­come isn’t the only de­ter­mi­nant of the im­pact of the tax changes.”

On the busi­ness side, it again de­pends on cur­rent tax rates and loop­holes.

“We don’t know what busi­ness (or even house­hold) tax breaks will be elim­i­nated,” Naroff noted. “So it is hard to know who wins and who loses ...

“Any change will have ma­jor eco­nomic im­pli­ca­tions. Right now we only have a rough out­line of the plan. It’s the de­tails that mat­ter and as usual, those are be­ing left up to Congress, where pol­i­tics and in­flu­ence will de­ter­mine the fi­nal struc­ture of any bill.”

Greg Davis, CIO at Van­guard, told Bloomberg the Malvern area-based mu­tual fund gi­ant sup­ports tax re­form — as long as it’s done re­spon­si­bly.

“Our view is that, look, tax re­form, we view that very pos­i­tively,” Davis said. “Re­duc­ing cor­po­rate tax rates, sim­pli­fy­ing and re­duc­ing in­di­vid­ual tax rates, we view that all as very pos­i­tive in terms of eco­nomic growth ... The de­tails are go­ing to be un­be­liev­ably im­por­tant be­cause you need to do all these things in a very fis­cally re­spon­si­ble way. So the de­tails are ab­so­lutely go­ing to mat­ter.”

“Re­duc­ing cor­po­rate tax rates, sim­pli­fy­ing and re­duc­ing in­di­vid­ual tax rates, we view that all as very pos­i­tive in terms of eco­nomic growth ... The de­tails are go­ing to be un­be­liev­ably im­por­tant be­cause you need to do all these things in a very fis­cally re­spon­si­ble way. So the de­tails are ab­so­lutely go­ing to mat­ter.” — Greg Davis, Van­guard CIO

MICHAEL CON­ROY — THE ASSOCIATED PRESS

Pres­i­dent Don­ald Trump speaks Wed­nes­day in Indianapolis.

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