October 09, 2017
Trump’s massive tax proposal is all about keeping things simple
President Donald Trump last week promised Americans "a giant, beautiful, massive — the biggest ever in our country — tax cut." As delicious as that sounds, Trump's tax overhaul may be tastiest for what it makes tiny, appealing, and compact: the 1040 tax return.
If Washington Republicans manage not to botch tax reform as they wrecked Obamacare repeal, simplification should be among the new system's most attractive elements, along with its consolidation of seven tax brackets to three: 12, 25, and 35 percent. Letting Americans keep more of their money should energize an economy finally awakening from the slumber of the Bush-Obama years.
House Speaker Paul Ryan, R-Wis., proposes a simple postcard for filing typical tax returns. Rather than the current 1040 form's 79 lines, Ryan's postcard contains 14. By ditching nearly every deduction, loophole and exemption — besides the home-mortgage and charitable write-offs — there simply would be fewer lines to fill.
This should cheer Americans who struggle to machete their way through today's tax system. The IRS' Amazon jungle is impenetrable, menacing and plagued by pitfalls at every turn. Last month in North Dakota, Trump called America's tax structure "outdated, complex and extremely burdensome." He further lamented the "billions of hours wasted on paperwork and on compliance." He added: "Our tax code is a giant self-inflicted economic wound."
According to the IRS' latest estimates, "The average burden for taxpayers filing Form 1040 is about 15 hours and $280." Meanwhile, "business taxpayers are expected to have an average burden of about 22 hours and $430." All told, taxpayers spend 6 billion hours and $195 billion on tax preparation annually. This entire enterprise is governed by the 10,298-page U.S. Tax Code, which is as dense as tropical hardwood.
Trump's answer to this mess: "Under our plan," he said, "95 percent of Americans will be able to file their tax returns on a single page without having to keep receipts, fill out schedules or track endless paperwork."
Trump's much-welcome simplification initiative faces two immediate speed bumps. First, Congressional Republicans from high-tax, left-leaning states such as California and New York are squirming to keep the state and local tax deductions. Dumping that loophole, however, will make the high-tax ways of Sacramento and Albany sting. And that would encourage such taxpayers to demand lower taxes from their governors, state lawmakers, mayors and city council members.
This would be good.
Also, Capitol Hill Republicans reportedly are warming to a fourth tax bracket for the highest-income earners.
This would be bad.
Washington Republicans have an infuriating habit of defeating Democrats at the polls and then impersonating them once in office. A fourth bracket, to ensnare the wealthy, smacks of far-left class warfare. Republicans should leave the rich-bashing to Bernie Sanders, Vermont's socialist U.S. senator.
Republicans should know — and loudly exclaim — that the top 1 percent of filers made 20.6 percent of all adjusted gross income and paid 39.5 percent of all income-tax revenue in 2014, as the latest Tax Foundation data confirms. The top 10 percent earned 47.2 percent of total AGI and generated 71 percent of federal income taxes.
Democrats whine that the wealthy will enjoy the lion's share of Trump's tax cuts. This is logical: After all, they pay the lion's share of taxes. This is no more shocking than a company that pays most of its commissions to those who produce the most sales.
Republicans should encourage Americans to celebrate how this plan cuts their own taxes, not scorn those who will save more, because they pay more. Further, the ensuing, robust growth will lift the fortunes of all Americans — perhaps disproportionately for those whose dim prospects brighten as the economy expands.
Trump's plan simplifies the tax code, streamlines tax filing and creates three tax rates, all lower than today's 39.6 percent top tier. Congressional Republicans should stop their needless self-sabotage, scrap this leftist fourth rate on the rich and speed the enactment of Trump's beautiful, massive tax cut.
Real News Update - 10.6.17
It Adds Up: Trump’s Plan to Cut Taxes Will Grow Federal Revenue