On July 27, the White House released a statement on Tax Reform that stated tax-writing committees in Congress would work this fall to “develop and draft legislation that would result in the first comprehensive tax reform in a generation.” The White House statement was blunt in stating “the American people have elected a President and Congress that are fully committed to ensuring that ordinary Americans keep more of their hard-earned money.”
However, a newly released report confirms that the White House is not really interested in tax reform that helps “ordinary Americans”. Instead, under President Trump’s proposed tax cut plan, “ordinary Americans” will hardly benefit at all, as nearly half of Trump’s proposed tax cuts would go to people making more than $1 million annually, according to the report by the Institute for Taxation and Economic Policy (ITEP).
As it pertains to North Carolina, the new report is clear in pointing out:
“A tiny fraction of the North Carolina population (0.5 percent) earns more than $1 million annually. But this elite group would receive 42.4 percent of the tax cuts that go to North Carolina residents under the tax proposals from the Trump administration. A much larger group, 50.8 percent of the state, earns less than $45,000, but would receive just 5.9 percent of the tax cuts.
The first group, the millionaires, would receive an average tax cut of $150,550 in 2018, equal to 6.4 percent of their income. The second group, those making less than $45,000, would receive an average tax cut of just $190, equal to 0.8 percent of their income.”
That report concludes with the confounding fact that the Trump tax principles would also reduce revenue in the U.S. by at least $4.8 trillion over 10 years. If this drastic approach took effect at the federal level it would put NC and our local governments at risk, as our state would not be able to sustain vital programs that help people thrive due to the costly tax cuts at both the federal and state level. In a recent brief the NC Budget & Tax Center stated: “The costly tax cuts in the new [NC] budget represent missed opportunities by lawmakers to ensure that the needs of a growing state are adequately met and to boost public investments that promote opportunity and broadly shared prosperity.”
If you are wondering how all of this is possible, here are the known Trump tax cut proposals that would primarily help the super-rich and would reduce U.S. revenues by $4.8 trillion over 10 years:
– Repeal of the 3.8 percent tax on investment income for the rich.
– Repeal of the Alternative Minimum Tax.
– Repeal of personal exemptions and doubling of the standard deduction.
– Replacement of current income tax brackets with three brackets: 10 percent, 25 percent, and 35 percent.
– Elimination of all itemized deductions except those for charitable giving and home mortgage interest.
– Special tax rate (15 percent) for businesses that do not pay the corporate income tax.
– New deduction and tax credit for child care.
– Repeal of special tax breaks for businesses and reduction in the corporate income tax rate from 35 percent to 15 percent.
– Repeal of the estate tax.
Luis A. Toledo is a Public Policy Analyst for the Budget & Tax Center, a project of the North Carolina Justice Center.