The Trump Tax Plan for Individuals

[Zeitgeist]

Under the Trump tax plan, people earning between $9,500.00 and $38,700.00 received a lowering in their tax rate of 3%.  People earning over $500,000.00 received a lowering in their tax rate of 2.6%.  In some businesses today, the highest paid earners, usually one person, can make over a billion dollars while the lowest paid full-time workers can earn well under $30000.00 a year.  Under such circumstances,  in an organization where one person is earning $2 billion and another is earning $20,000.00, one person is earning 10000 times what the lowest paid worker earns.  The billionaire saves $5.2 million with Trump's tax cut.  The worker with the $20000.00 salary will save $300.00 a year.  Consider also that this tax plan reduces the amount of tax revenue that the government receives to service its debt and pay for government services by $1.5 trillion.  The US has a national debt of over $21 trillion.  Is this good tax policy?  Only 2% of the US population earns over $500,000.00 a year.  Around one percent of the population earns over one million dollars a year.  Who do these tax cuts serve the most? 

[bush_cheney2004]

1 hour ago, Zeitgeist said:

...  Who do these tax cuts serve the most? 

 

Those who earn the most and pay the most in taxes.    "45% of Americans pay no net income taxes".

 

https://www.cnbc.com/2015/10/09/775-million-households-are-not-paying-federal-income-taxes.html

[Zeitgeist]

5 hours ago, bush_cheney2004 said:

 

Those who earn the most and pay the most in taxes.    "45% of Americans pay no net income taxes".

 

https://www.cnbc.com/2015/10/09/775-million-households-are-not-paying-federal-income-taxes.html

I wonder what percentage of the 45% expense their way out of taxes and how many aren't earning enough income to put them over the basic personal exemption, an exemption that everyone gets, rich and poor alike.

Why didn't Trump simply give the tax cuts to people in the bottom four or even five tax brackets?  It would mean that only those earning less than $192,000.00 would get the tax cut if it's the bottom four or only those earning less than $417,000.00 would get the tax cut if it's the bottom five brackets.  What if the money saved was targeted to paying down the debt or was used to further reduce the taxes on the poor and middle class?  Basically Trump's cuts have increased the debt substantially and redirected huge sums to people who are already very rich and need it the least.  Most of the debt will have to be paid down by the 98% of taxpayers who are middle class and poor, all so the elites can have even more.  

Edited November 24, 2018 by Zeitgeist

[bush_cheney2004]

33 minutes ago, Zeitgeist said:

I wonder what percentage of the 45% expense their way out of taxes and how many aren't earning enough income to put them over the basic personal exemption, an exemption that everyone gets, rich and poor alike.

 

Trump increased the personal exemption for all Americans, rich and poor alike.

 

Quote

Why didn't Trump simply give the tax cuts to people in the bottom four or even five tax brackets?  It would mean that only those earning less than $192,000.00 would get the tax cut if it's the bottom four or only those earning less than $417,000.00 would get the tax cut if it's the bottom five brackets.  What if the money saved was targeted to paying down the debt or was used to further reduce the taxes on the poor and middle class?  Basically Trump's cuts have increased the debt substantially and redirected huge sums to people who are already very rich and need it the least.  Most of the debt will have to be paid down by the 98% of taxpayers who are middle class and poor, all so the elites can have even more.  

 

Actually, the "elites" already pay the lion's share of income taxes.   No money has been redirected...personal income does not belong to the government...rich or poor.

A good portion of the debt is for social programs / entitlements that go far more to the working class and poor.

U.S. federal income taxes remain very progressive, as before....

Edited November 24, 2018 by bush_cheney2004

[Zeitgeist]

I still don't understand why the top 2%, earners of $500,000.00 or more, needed a tax cut, especially one that is being paid for by increasing the national debt.

[bush_cheney2004]

23 minutes ago, Zeitgeist said:

I still don't understand why the top 2%, earners of $500,000.00 or more, needed a tax cut, especially one that is being paid for by increasing the national debt.

 

It's not a tax cut...the government is just confiscating less personal income....but still making higher income quintiles pay far more than others.

The U.S. national debt is increased by borrowing and spending.

[Zeitgeist]

12 hours ago, bush_cheney2004 said:

 

It's not a tax cut...the government is just confiscating less personal income....but still making higher income quintiles pay far more than others.

The U.S. national debt is increased by borrowing and spending.

If the IRS is taking in less dollars to service or pay down debt, and if in fact public spending is increasing despite the fact that less tax revenue is being collected by government, that means that there isn't enough tax being collected to pay for all government spending (including your beloved bloated military).  Was it worth giving massive tax cuts to the rich?  Does a billionaire deserve to pay millions less in taxes, especially when the national debt is rising?

[bush_cheney2004]

2 hours ago, Zeitgeist said:

If the IRS is taking in less dollars to service or pay down debt, and if in fact public spending is increasing despite the fact that less tax revenue is being collected by government, that means that there isn't enough tax being collected to pay for all government spending (including your beloved bloated military).  Was it worth giving massive tax cuts to the rich?  Does a billionaire deserve to pay millions less in taxes, especially when the national debt is rising?

 

Yes...they do.   Governments have continued deficit spending regardless of tax revenue.  

Also, one should not conflate income with wealth, as they are two completely different things for IRS purposes.

[eyeball]

15 hours ago, bush_cheney2004 said:

The U.S. national debt is increased by borrowing and spending.

At risk of sounding as naive as a fiscal conservative, who pays back the debt and how?

[bush_cheney2004]

1 minute ago, eyeball said:

At risk of sounding as naive as a fiscal conservative, who pays back the debt and how?

 

The debt will never be paid back....just monetized and refinanced.  Debt begets still more debt.

Some nations just default and start over again.

[Zeitgeist]

50 minutes ago, bush_cheney2004 said:

 

Yes...they do.   Governments have continued deficit spending regardless of tax revenue.  

Also, one should not conflate income with wealth, as they are two completely different things for IRS purposes.

I’m speaking strictly about annual income.  

[bush_cheney2004]

1 hour ago, Zeitgeist said:

I’m speaking strictly about annual income.  

 

Very well....the annual income of the upper quintile is already taxed at a much higher rate.   Tax legislation in the US Congress is influenced by many special interests and considerations....and believe it or not...we even let rich people vote.

[Zeitgeist]

1 hour ago, bush_cheney2004 said:

 

Very well....the annual income of the upper quintile is already taxed at a much higher rate.   Tax legislation in the US Congress is influenced by many special interests and considerations....and believe it or not...we even let rich people vote.

No doubt rich people vote.  It's the poor who don't seem to make it to the ballot boxes.

[bush_cheney2004]

1 hour ago, Zeitgeist said:

No doubt rich people vote.  It's the poor who don't seem to make it to the ballot boxes.

 

Plenty of poor people make it to the ballot box, but they pay the least in income taxes.

Government policies are not just for the welfare of poor people.

[eyeball]

1 hour ago, bush_cheney2004 said:

Plenty of poor people make it to the ballot box, but they pay the least in income taxes.

Government policies are not just for the welfare of poor people.

If it wasn't for welfare rich people would be...cake.

[TTM]

On 11/23/2018 at 8:23 PM, bush_cheney2004 said:

U.S. federal income taxes remain very progressive, as before....

Based on the US distribution of wealth, those tax rates seem mostly fair, although the top 5% could use a slight tax hike, and not the reduction they got this year.  Gov't tax revenue should roughly match the distribution of wealth, otherwise the tax structure itself is redistributing wealth.

 

Looking at income tax only though skews the numbers somewhat as the lower incomes pay significant payroll tax. I'm not sure how much that affects your chart though.  

Corporate tax revenue as a percent of overall tax income has decreased fairly constantly overpost WW2 even though profits have not.  Some of that, but not all is offset by the ~50% of payroll taxes paid by businesses.  The rest of this tax burden has shifted from corporations to individuals, and disproportionally to the poor and middle classes since the payroll tax is capped at a little over 100k. Corporate tax revenue again dropped significantly with the tax cuts this year.

 

Regarding the results of the tax cut on government revenues: 

http://www.thefiscaltimes.com/2018/08/13/Are-Tax-Revenues-Really-Rising

https://www.nytimes.com/2018/10/17/business/trump-tax-cuts-revenue.html

[bush_cheney2004]

4 minutes ago, TTM said:

Corporate tax revenue as a percent of overall tax income has decreased fairly constantly overpost WW2 even though profits have not.  Some of that, but not all is offset by the ~50% of payroll taxes paid by businesses.  The rest of this tax burden has shifted from corporations to individuals, and disproportionally to the poor and middle classes since the payroll tax is capped at a little over 100k. Corporate tax revenue again dropped significantly with the tax cuts this year.

 

The poor and middle class also benefit disproportionately from Social Security/Medicare payroll taxes and other entitlement programs that are funded by much higher marginal income tax rates for upper quintiles, high net worth estate (death) taxes, alternative minimum income taxes, etc.

State and local governments maintain regressive sales and sin taxes that impact the poor more than income taxes.

[TTM]

1 hour ago, bush_cheney2004 said:

The poor and middle class also benefit disproportionately from Social Security/Medicare payroll taxes and other entitlement programs that are funded by much higher marginal income tax rates for upper quintiles, high net worth estate (death) taxes, alternative minimum income taxes, etc.

This does not change the fact that that graphic is skewed somewhat by not including all tax burdens, rather than just income tax.

The poor and middle class do not benefit disproportionately from programs,  they benefit proportionally to need. If they benefitted disproportionately, then their share of the distribution of wealth would be increasing. These programs are a transfer of income, but not wealth (at the current state; they would have transferred wealth when initially set up). Ending them would end the income transfer, resulting in a transfer of wealth from the poor (a relatively large decrease) to the rich (a relatively small increase) until a new equilibrium is reached. You would have more poor people, more sick people, more bankruptcies, etc. all of which would be a net drag on your economy.  I'm not sure why you would want that, but whatever floats your boat.

As an aside, since you mentioned it: if it was up to me, the estate tax would take 100% over a relatively small estate.  Inheritance is the definition of unearned weath. 

Edited November 27, 2018 by TTM

[bush_cheney2004]

4 minutes ago, TTM said:

This does not change the fact that that graphic is skewed somewhat by not including all tax burdens, rather than just income tax.

 

 

No, it is not skewed because the 45% claim is for federal income taxes.   The graphic is correct for that matter.

 

Quote

The poor and middle class do not benefit disproportionately from programs,  they benefit proportionally to need. If they benefitted disproportionately, then their share of the distribution of wealth would be increasing. These programs are a transfer of income, but not wealth (at the current state; they would have transferred wealth when initially set up). Ending them would end the income transfer, resulting in a transfer of wealth from the poor (a relatively large decrease) to the rich (a relatively small increase) until a new equilibrium is reached. You would have more poor people, more sick people, more bankruptcies, etc. all of which would be a net drag on your economy.  I'm not sure why you would want that, but whatever floats your boat.

 

Nevertheless, Social Security and other entitlement programs are "skewed" for the poor, with higher income quintiles benefiting less proportionately from payroll taxes by design.  Many federal and state benefits programs (aka "welfare") are exclusively limited to lower/no income individuals and families.

Quote

As an aside, since you mentioned it: if it was up to me, the estate tax would take 100% over a relatively small estate.  Inheritance is the definition of unearned weath. 

 

Of course...100% confiscation and wealth redistribution are a socialist/marxist dream....but not reality.   Such schemes are easily beaten with non-taxable wealth management strategies (e.g. life insurance and trusts).

[Bonam]

I think payroll taxes need to be reworked. They are counter-productive to the fundamental idea of a "progressive" tax system and increase complexity by having multiple parallel and separate tax rates and brackets. You have the normal income tax brackets, then you have social security which is an extra 6.2% on both employee and employer but actually goes down to 0% after $132,900 in income, and then you have the medicare tax which is 1.45% for both employee and employer, but an additional 0.9% medicare tax is employed on incomes above $200,000. Then you have the standard deduction, which applies to the tax brackets for income tax but not for social security and medicare tax. The net result is a complex mess, before you even consider itemized deductions, tax credits, investment and business taxes and their varying tax rates, etc. 

I think payroll taxes should be eliminated completely and income taxes raised correspondingly (in a net revenue neutral way) so that it's all part of one set of more easily understandable tax brackets. The level of progressiveness of tax rates could then be more easily understood by laymen, rather than the current situation where tax rates actually shift multiple times from progressive to regressive to progressive again as you scan through the income spectrum. 

[Bonam]

2 hours ago, TTM said:

Corporate tax revenue as a percent of overall tax income has decreased fairly constantly overpost WW2 even though profits have not.  Some of that, but not all is offset by the ~50% of payroll taxes paid by businesses.  The rest of this tax burden has shifted from corporations to individuals, and disproportionally to the poor and middle classes since the payroll tax is capped at a little over 100k. Corporate tax revenue again dropped significantly with the tax cuts this year.

All money ultimately ends up in the hands of individuals. Corporations may build up temporary cash piles during slow economic times, but not permanently. Eventually, money goes to employees (as salaries/bonuses), owners/investors (as dividends/capital gains), as well as suppliers and vendors and other companies. Taxing companies is inefficient because their finances are complex and ascertaining how much tax a company owes is difficult and can easily be skewed by different accounting methods and legal practices, which large companies employ to great effect. It is also inefficient because it causes companies to plan their business practices around tax efficiency, rather than optimizing growth and competitiveness. In contrast, individual taxes are much simpler compared to corporate taxes. Additionally, companies can easily move their headquarters, operations, or profits around the world to try to evade tax rates, while individuals would have to physically move, a prospect that is often less attractive. 

I would suggest that corporate taxes ought to be eliminated completely, but the revenue should instead be gathered by taxing the beneficiaries of corporate profits... investors. Right now, most types of investment income are taxed at rates much lower than wage income. I would recommend that direct corporate taxes be completely eliminated, but that all dividend and capital gain income be taxed at the same rates as wages. 

That, together with my above post about eliminating payroll taxes, would constitute actual tax reform, not just tinkering with the brackets a bit while eliminating some deductions and expanding others. 

Edited November 27, 2018 by Bonam

[bush_cheney2004]

7 minutes ago, Bonam said:

....I think payroll taxes should be eliminated completely and income taxes raised correspondingly (in a net revenue neutral way) so that it's all part of one set of more easily understandable tax brackets. The level of progressiveness of tax rates could then be more easily understood by laymen, rather than the current situation where tax rates actually shift multiple times from progressive to regressive to progressive again as you scan through the income spectrum. 

 

Elimination of payroll taxes has already been proposed several times (e.g. Sen. Rand Paul) in favour of a value added tax (VAT) and other tinkering, but such ideas are dead on arrival because of the practical and political problem with transition funding and entitlements restructuring.   Social security and Medicare are the so called "third rail" in American politics....touch it and your political career will die.

 

[Bonam]

3 minutes ago, bush_cheney2004 said:

Elimination of payroll taxes has already been proposed several times (e.g. Sen. Rand Paul) in favour of a value added tax (VAT) and other tinkering, but such ideas are dead on arrival because of the practical and political problem with transition funding and entitlements restructuring.   Social security and Medicare are the so called "third rail" in American politics....touch it and your political career will die.

Good thing I don't have a political career, so I can just say things that make sense rather than worrying about it. 

[TTM]

30 minutes ago, bush_cheney2004 said:

1. The graphic is correct for that matter.

2. Nevertheless, Social Security and other entitlement programs are "skewed" for the poor

3. Of course...100% confiscation and wealth redistribution are a socialist/marxist dream....but not reality.  

1. It is correct but somewhat misleading 

2. Yes.  It would not make sense if they weren't 

3. Inheritance has zero to do with capitalism

[bush_cheney2004]

4 minutes ago, TTM said:

1. It is correct but somewhat misleading 

2. Yes.  It would not make sense if they weren't 

3. Inheritance has zero to do with capitalism

 

Wealth has already been taxed at several levels and should not be subjected to even more confiscation by government upon death.   It is also politically impossible to means test social insurance programs and Medicare benefits.    The poor are means tested to qualify for and receive Medicaid, food, and housing benefits.