Behold, the most unusual aspect of Donald Trump’s newly-unveiled tax proposal:
If you are single and earn less than $25,000, or married and jointly earn less than $50,000, you will not owe any income tax. That removes nearly 75 million households – over 50% – from the income tax rolls. They get a new one page form to send the IRS saying, “I win,” those who would otherwise owe income taxes will save an average of nearly $1,000 each.
The plan has no details on whose tax forms would say “I lose.”
He boasts, “the Trump plan eliminates the income tax for over 73 million households. 42 million households that currently file complex forms to determine they don’t owe any income taxes will now file a one page form saving them time, stress, uncertainty and an average of $110 in preparation costs.”
There are some conservatives who argue this is precisely the problem. A growing proportion of Americans enjoy government’s benefits without paying anything in income taxes; they see no reason to limit the growth of government because they don’t feel like they’re paying for it.
Having said that, there’s a lot for conservatives to like in this plan: Fewer tax brackets, elimination of the inheritance or “death tax.” Some conservatives argue that the deductions for mortgage interest ought to go, but such a move would be phenomenally unpopular with homeowners. The charitable giving deduction stays in place.
One big question is whether people see the “repatriation” provision as a good move to bring in company cash currently sitting overseas, or a giveaway to big corporations?
A one-time deemed repatriation of corporate cash held overseas at a significantly discounted 10% tax rate. Since we are making America’s corporate tax rate globally competitive, it is only fair that corporations help make that move fiscally responsible. U.S.-owned corporations have as much as $2.5 trillion in cash sitting overseas. Some companies have been leaving cash overseas as a tax maneuver. Under this plan, they can bring their cash home and put it to work in America while benefiting from the newly-lowered corporate tax rate that is globally competitive and no longer requires parking cash overseas. Other companies have cash overseas for specific business units or activities. They can leave that cash overseas, but they will still have to pay the one-time repatriation fee.