Tuesday, October 17, 2017

Is Trump's Tax Reform for the Rich? Top 1% Pay Seven Times the Rate of Bottom 50%

In September, President Trump unveiled his tax reform plan to a chorus of boos from the big government tax and spend devotees.

For example, New York Democrat Senator Schumer, Grand Poobah of the big spenders, tweeted, ""GOP #TaxReform plan & what @SpeakerRyan says about it are 2 diff things. Says plan is for middle class but 80% is for wealthy-Get real Paul."

According to the Tax Foundation, the latest income tax data show that the top 50% of income earners paid 97.3% of income taxes, with the bottom half of income earners paying only 2.7%.

Furthermore, the top 1% of income earners paid an individual income tax rate of 27.1%, which was more than seven times higher than that of the bottom 50% who paid an income tax rate of only 3.5%. Thus, a tax reform package that differentially supports low and middle income taxpayers would further distort a tax system that already punishes educational achievement, innovation, and entrepreneurship, all of which lead to income growth.

On top of this, the element of the President's tax reform package garnering the most criticism from supposed defenders of low and middle income taxpayers is the elimination of the deduction for state and local income taxes. Currently the benefits of this deduction go largely to high income earners, and it encourages state and local taxing units to raise taxes. Eliminating this deduction would cost taxpayers with incomes over $200,000 an average of $7,000, but an average of only $100 for taxpayers making less than $200,000.

To bolster passage of his plan, Trump might channel Nobel prize winning economist Milton Friedman who said, "I am in favor of cutting taxes under any circumstances and for any excuse, for any reason, whenever it's possible."
Ernie Goss

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