Reforming the tax code

Rep. Capuano (D-MA) explains his view of proposed tax reform:

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Reforming the Tax Code – in One Page

On Wednesday we got a peek at what the Trump Administration’s so-called tax reform plan looks like. I’d like to be clear that I am certainly open to legitimate, thoughtful tax reform. As a former tax attorney, I understand fully there are many aspects of the tax code that can and should be modernized.  What we saw this week shouldn’t even be called a tax reform plan because it was a one page outline with virtually no details. In fact, officials could not even answer the basic question of what this “plan” would mean for the bottom line of a family of 4 making $60,000 a year.

The Trump tax outline would reduce income tax brackets from 7 to 3: 10%, 25% and 35%. The corporate tax rate would go from 35% to 15%. The estate tax and the alternative minimum tax would both be eliminated. The proposal doubles the standard deduction for individuals (currently $6,350) and married couples (currently $12,700). It eliminates a number of personal deductions, including the one for state and local taxes.

The bipartisan, highly respected Committee for a Responsible Federal Budget estimates that Trump’s tax “reform” outline would cut taxes by $5.5 TRILLION dollars over the next 10 years. That’s $550 Billion per year, or about 25% of all the taxes raised currently from the income, corporate and estate tax combined.  Here is another way to look at that amount: it equals about 20% of the entire GDP of the USA. The organization goes on to conclude that “America can’t Afford a $5.5 Trillion Tax Cut” … and … “Growth Can’t Pay for this Tax Cut”. Here is their commentary for your review. http://www.crfb.org/blogs/fiscal-factcheck-how-much-will-trumps-tax-plan-cost.

Since there isn’t any actual legislation, just this thin outline, I don’t expect a vote to happen soon. Although with this White House, anything is possible.

I can’t explain why anyone would favor fewer tax brackets; fewer brackets penalize small increases in income which would put one in the next higher bracket. Perhaps fewer brackets presage a move toward some form of “flat tax.”

As Rep. Capuano believes there are many aspects of the tax code that can and should be modernized,” I am disappointed that he didn’t explain what these are. When politicians talk reform, we should ask what they mean by that.

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About whungerford

* Contributor at NewNY23rd.com where we discuss the politics, economics, and events of the New New York 23rd Congressional District (Allegany, Cattaraugus, Chautauqua, Chemung, (Eastern) Ontario, Schuyler, Seneca, Steuben,Tioga, Tompkins, and Yates Counties) Please visit and comment on whatever strikes your fancy.
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