Here Is How Tax Code Reform Could Help Black & Brown Communities
May 09 2017 by Harriet Stone
Approximately one-third of taxes now collected are paid by those in the 15 percent tax bracket. Trump is now realizing that the system was deliberately created to be creaky and cumbersome, to require a careful examination of flawed proposals like his tax plan, to restrict a president's authority and restrain his worst impulses.
If Republicans ever get on with tax reform legislation, they might want to rethink their president's approach, which mirrors 1980s-style tax reform. President Reagan tried to eliminate it in 1986 but failed.
So what are the obstacles to getting some version of the president's tax reform done? The plan would also eliminate many distortions associated with multinational firms, including eliminating the tax treatment that discourages repatriation of foreign source income to the USA and the incentive for firms to engage in corporation inversions. R. 25 - Fair Tax Act of 2017, introduced January 3, 2017.
Part of the process of reforming the tax code would entail shifting it to a territorial system and providing a one-time window under which U.S. companies could repatriate the money with little or no tax liability. Taxes are the federal government's revenue, it is what pays for many things, like interstates and highways, our military, border defense, national parks and social programs that help the most vulnerable, to name a few. Trump hopes to bring some of those profits and operations back to the US with more competitive business tax rates. But in reality, nobody paid tax at those rates. The last one alone, which affects just 5,300 fortunes annually, would cost some $174 billion over a decade, according to the non-partisan Tax Policy Center. I am a responsible steward of my income. Income subject to tax was accelerated and deductions were either deferred or eliminated. It was no longer possible to invest in tax shelters. Americans want tax cuts. A Treasury Department analysis done while I was chairman of the Council of Economic Advisers showed that a given dollar of tax cuts through expensing is more powerful than rate cuts in the short run by about a factor of four. Before 1986, they often paid 70 percent of zero because they were able to reduce their taxable income to amounts significantly below their economic income. Fortunately, the White House tax-proposal outline provides a lot of room to maneuver in forthcoming negotiations with Congress to do so. At various times President Donald Trump promised that the rich would pay more and that his own taxes would go up.
According to the CRS, the blueprint would simplify the tax system's administration and compliance by reducing the number of itemizers, eliminating the estate tax, simplifying depreciation, and eliminating the need for most global tax planning to shift profits out of the U.S. However, some new complications would be introduced.
Fortunately, his plans are meeting massive resistance from Republicans and Democrats alike.
President Trump has incorporated variations of these proposals.
The good news is that Trump's proposed tax cuts are so dramatic that USA lawmakers will likely balk at such a huge loss of revenue and ballooning deficits. The 40 percent figure accounts for corporate taxes at the state levels.
Monitoring developments in evolving tax rates and rules is a strong, action-oriented first step. And it turns out, as Max Enhenfreund of The Washington Post reported Monday morning, that the two economists who supported Mnuchin's claim "now both say they made a mistake, and that they misunderstood the question".
Although I am retired, I still prepare a number of returns for friends and family.
The U.S has much to gain from lowering its corporate tax rate, but extending this rate to unincorporated businesses is more problematic. I am not against reform, but it must be handled in a correct and transparent manner.
Obviously, my endeavor is not scientifically based and we don't know the precise provisions of what Congress will ultimately pass.