Trump's big tax cut

  • 28 April 2017
  • NormanL
Trump's big tax cut

The Trump administration rolled out its tax cut program this week, and it is a big one.  In the White House briefing on the plan, National Economic Council director Gary Cohn said:

We are going to cut taxes and simplify the tax code by taking the current seven tax brackets we have today and reducing them to only three brackets -- a 10 percent bracket, a 25 percent bracket, and a 35 percent bracket.  We're going to double the standard deduction so that a married couple won't pay any taxes on the first $24,000 of income they earn.  So, in essence, we are creating a zero tax rate -- yes, a zero tax rate -- for the first $24,000 that a couple earns.

The largest standard deduction also leads to simplification because far fewer taxpayers will need to itemize, which means their tax form can go back -- yes -- to that one simple page that I talked about earlier. 

Families in this country will also benefit from tax relief to help them with child and dependent care expenses.  We are going to repeal the alternative minimum tax.  The AMT creates significant complications and burdens which require taxpayers to do their taxes twice to see which is higher.  That makes no sense, and we should have one simple tax code.

As we all know, job creation and economic growth is the top priority of the administration.  Nothing drives economic growth like capital investment.  Therefore, we are going to return the top capital gains tax rate and dividend rate to 20 percent, repealing the harmful 3.8 percent Obamacare tax on dividends and capital gains.  That tax has been a direct hit on investment income and small business owners. 

We're going to repeal the death tax.  The threat of being hit by the death tax leaves small business owners and farmers in this country to waste countless hours and resources on complicated estate planning to make sure their children aren't hit with a huge tax when they die.  No one wants to see their children have to sell the family business to pay an unfair tax.

We're going to eliminate most of the tax breaks that are mainly benefits to high-income individuals.  Homeownership, charitable giving and retirement savings will be protected.  But other tax benefits will be eliminated.

This isn't going to be easy.  Doing big things never is.  We will be attacked from the left and we will be attacked from the right.  But one thing is certain:  I would never, ever bet against this President.  He will get this done for the American people.

Cohn is correct that there will be substantial opposition from the big spenders in both parties to the idea of tax cuts. To their thinking, government has first claim on your wallet, and any effort to let you keep more of what you have worked for is wrong.

That mindset hasn't changed. What is different this time around is the President has made it clear he wants as much of this proposal to be enacted as possible (preferrably, all of it). His goal is to spur economic growth, which tax cuts in the past have done, and done well.

Whether Congress agrees -- and understands that it must, must, must cut spending in order to help balance the government's books -- is another matter.