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Trump’s New Policy Has Everyone Talking – Here’s What You Have to Say

7 | By Shah Gilani

The responses to last week’s Why Trump’s Tax Plan is a Slap in the Face to the Middle Class were incredible and thought-provoking… Many of you agreed with my position, and many didn’t, but just about everyone had something useful and intelligent to say.

Today, I’ll address a few that left me eager to respond.

Read on to see if yours was one of the comments I singled out…

Q: I read an article explaining that Trump’s corporate tax plan is all a bunch of smoke and mirrors as well. The average S&P 500 company pays an effective tax rate somewhere between 10-20% (rough numbers as I don’t remember the exact number). With all the loopholes and deductions, they pay nowhere near the 35%. So, basically, the premise was that lots of businesses will actually see tax increases.

It all goes back to the fact that Trump misrepresents just about everything he talks about. He is as big a liar as the rest of the politicians. It will be interesting to see how long it takes the masses to catch on… SS

A: It’s not fair to say the President’s business tax plan is all smoke and mirrors. We haven’t seen it fully fleshed-out.

I believe we agree the so-called 35% top corporate rate isn’t paid by many, because with deductions, credits, etc. their effective tax rate is about 14%.

Lowering the rate to 15%, I think is too aggressive right out of the gate. Because the wealthy own most of this country’s big producing assets (corporations) and manage them for exorbitant compensation (including stock options), it makes more sense to lower the corporate tax rate to a flat 25% while eliminating most deductions for two years starting in 2018.

Then, we lower it to 20% in 2020, then to 15% in 2023. Also, it makes sense to graduate the tax rate based on net profit. If we want to be fair to small businesses and start-ups, their tax rates should be lower and increase as they hit net profit milestones. That’s essentially the same proposition as lowering the burden on individuals who don’t make a lot. It makes business sense to let small and growing businesses keep more of what they make to hopefully expand.

Q: I agree with you, Shah, but as a middle class taxpayer with no children and relatively normal investments, my main desire is ACTUAL tax simplification. Why do I have to spend several hours a year figuring out how much I owe or how much of a refund I should get? I should get a bill or a credit notification from the federal government, along with a form allowing me to add or subtract things that are not reported or have been reported incorrectly, and changing the total accordingly. THAT would cut the budget for the IRS to nearly nothing. Frankly, if the amount is not completely out of line, and I agree with what the government records show, I would probably not bother to fill out that form – just pay them, or agree to their calculated refund. – Susan C.

A: The conflict there is that tax simplification means fewer brackets, fewer deductions, and maybe a progressive flat tax. While that would make sense, I don’t think it’s fair to cut out all deductions. There are many deductions that make economic and personal sense, for example for: children, education, job training, and healthcare costs should be deductible. Given the current tax code, it would be risky to trust the federal government to calculate all deductions and credits you might be entitled to, considering they want your money as much as you want to keep it.

Q: More people need to get hold of good tax guides and figure out for themselves what they can do to lower their taxes. You can’t depend upon accountants to do it for you. This may not solve the whole problem, but I believe that most people could lower their taxes somewhat if they were to search out those features that are used by the wealthy. A couple thousand dollars saved in this way can be used to increase security and decrease taxes more in the future. This requires some work, but it may be more worth the effort than you may think at first. I never did earn much money, but I have achieved some success with this strategy. It enabled me to retire at 50. I don’t have a lot of money now, but I am comfortable.

There is a book entitles Five Acres and Independence which you should read. Even if you live in the city, you may be able to raise some of your food, which is always a great idea. – Ken

A: Ken, I hope everyone reads your post, thank you.

You are right in that a lot of people could “save” a lot of money if they took advantage of the current tax code. The problem, and it’s a BIG one, is that hardly any middle-class folks know what they can do and there are no advertisements telling them how they can lower their taxes.

Part of the problem is that tax preparation services, as convenient as they are, and “simple” filing options are designed to shoehorn taxpayers into neat little boxes (kind of like tax coffins).

Tax preparers, for example, are hopefully decent at wringing out more deductions than filers may be aware of, but they certainly don’t know how to “structure” a filer so they can take advantage of a lot of other deductions they may be entitled to.

And that short form… well, it’s a ruse to get folks to shut up and just pay up, and not bother with any of those “pesky” deductions. Until we get a fairer tax system that flattens the field, everyone should do whatever they can to lower the inordinate tax burden on all of us.

Q: I have looked at the tax code. Yes, lowering corporate taxes will lower costs, but will that extra revenue be used to enhance those at the top? There are no deductions for the employed, except dependents, state taxes (which are taxes), property taxes. In business, there are so many available. What about needing a car to get to work, etc.? No deduction for the employee.

You are often so right; I just want a mathematician’s view point. – Janet

A: You’re mostly right, Janet, with a few exceptions addressed by Ken and me above. But you’re absolutely right as far as businesses. Businesses deduct the cost of pretty much anything that goes into making their business work, which lowers their tax burden. That makes sense if rates are high and we want to encourage businesses to hire people and produce goods and services.

Lowering the tax rate individuals pay to offset what they should otherwise be able to deduct, like businesses do, is the only fair way to even the playing field.

Q: Shah, you are right on the money! This country had much higher tax levels at the upper income brackets in the past, and it didn’t undermine investment and growth. Thank you for having the courage to speak out like this. – Allen

A: Thanks, Allen. We had always managed, whatever our tax burdens were. Now, they’ve become too lopsided and the once thriving middle class, with its access and aspirations to the upper class of income earners and wealth accumulators has been sorely disadvantaged. I’m not for soaking the rich at all. I just believe that if you make a million dollars you should pay a slightly higher percentage of your net income than someone making less than $100,000. And if you make $10 million you should pay a little more.

Q: I find your comments interesting though very much like the Democrats. The solution to tax problems does NOT lie in the wealth of the 1% or 10%, but rather in the horrible spending habits of our government. – Michael C.

A: We are in total agreement Michael (although, not on me sounding like a Democrat). There is a huge problem with government spending; I didn’t go down that path only because it’s a whole other can of worms. Instead, I’m suggesting we simplify the tax code, simplify tax brackets and eliminate most deductions.

If the rich have a “flat” tax that net-net takes more out of their pockets because they don’t have all those deductions and tax avoidance opportunities, we can all bet they will start to work on cutting spending in the government if it’s them (more than the middle class) who are shelling out money for government waste.

Thanks to everyone who’s taken the time to write me a note. Whether we agree or disagree, this is a topic that touches a very sensitive nerve, and we’ve got plenty to talk about.

Feel free to keep the conversation going in the comments below, or on Facebook and Twitter.

Sincerely,

Shah

7 Responses to Trump’s New Policy Has Everyone Talking – Here’s What You Have to Say

  1. Trent Matthews says:

    Shah,
    I would completely disagree with your assessment. You said the that lower taxes would keep the the cost of goods down and that is correct, but you questioned if the extra revenue would only benefit those at the top. It will benefit them in the pocket but some of those extra revenues will be put back into expansion and that means jobs because they realize that means additional revenue which leads to jobs. Also you are not taking into account corporations will still have some deductions however maybe fewer but your assumption is they will have none. There has never been anything solved by higher taxes period.

    I realize you my understand investing in the market; however, you have no understanding at all about economics. Maynard Kane must me one of your economic icons. The government never spends our money better than we can as individuals. The other thing you didn’t take into account is if the democrats or specifically Clinton had her way she would have raised the corporate rate to around 49 percent even with the current deductions corporations would be paying between 28 to 30 percent far more than the 14 percent you mentioned. Be careful what you wish for my friend that would have been a disaster! If you want to have a better understanding of economics I would suggest you read John Locke and Adam Smith because its obvious the writings are completely foreign to you. The only true ” slap in the face of the middle class” was your ridiculous poorly thought out article.

  2. Ron Miller says:

    I like what Ken had to say about folks educating themselves about their own taxes. I firmly believe that we (citizens of the U.S.) are gluttonous and lazy. We want instant gratification today and to hell with tomorrow, we worry about that if, and when, it arrives. And, the lightening fast paced technological age that we currently live in fuels this way of life. I swear it seems that we have somehow come to believe that we are “entitled” to something. Let me be perfectly clear – the only entitlement we have is DEATH (and taxes). I believe it’s time for us to really start taking responsibility for ourselves and stop relying on our broken down corrupt government to take care of our sorry asses. Every tax payer should know how to do their own taxes and learn their own strategies for sticking it to Uncle Sam. Consider this, tax preparers do taxes to earn a living, not because they have an overwhelming zealous desire to pour through 1,000’s of pages of tax code to get you the most return, or least amount to pay – just saying. Knowledge is, and always will be, the only real power any one individual can obtain – PERIOD. However, it’s up to the individual to seek out and obtain knowledge which requires effort. Yep, it requires work and it certainly doesn’t fit well with our insatiable need for instant gratification; therefore, bitching, instead of action, has become the norm.

    • Wallace S. Berg Jr. says:

      Not to put to fine a point on it but the tax code is over a 1000 pages long written by lawyers. I dare say you have never read it and I haven’t and never will. What a ridiculous waste of precious time.

  3. Stephen says:

    It is a shame that no one wants to talk about the obvious solution to the tax situation which is the Fair Tax. If anyone should read or study anything it should be Neal Boortz’s book on the fair tax. It is a quick read because the fair tax is so uncomplicated. If you read the book you will realize just how dishonest the opponents of the fair tax have to be to oppose it.

    The more wealth people have the more extravagant lifestyle they lead and therefore the more tax they pay. The poor pay no taxes at all. If the middle class is willing to lead a frugal lifestyle they also can pay zero taxes. Saving will become the thing to do, again. This is a no brainer. No reporting on your income to the government at all (doesn’t get any more uncomplicated than that for paperwork). The IRS would be abolished and replaced by about 5 accountants to tabulate the tax revenue from the states, as the states actually collect the taxes from the retail businesses.

    The only problem is the politicians that just don’t want to give up control over our lives.

  4. J says:

    It seems to me Trump pulled a bait and switch. His first tax plan was definitely a winner and his second shows he cares only for his bracket. I do not trust Trump’s word after this.

    Trump’s first tax plan

    Donald Trump Unveils His BOLD Income Tax Proposal – This is a BIG DEAL!
    Read more: http://www.thepolitica linsider.com/donald-trump-unveils-his-bold-income-tax-proposal-this-is-a-big-deal/#ixzz4OEuTbrab
    Conservative Presidential candidate Donald Trump is a smart businessman. He works hard, and does whatever he can to pay the minimal amount of taxes to President Barack Obama.
    Now, as Trump announced in his book “Time to Get Tough: Making America #1 Again,” we learn Donald Trump’s bold and specific plans to completely restructure America’s tax code. And after the changes are made, every American will end up paying lower taxes.
    Called the “1-5-10-15” income tax plan–this will likely form the basis of his presidential campaign. Tax proposals consist of the following:
    * Those making up to $30,000 will pay 1 percent.
    * Income from $30,000 to $100,000 results in a flat 5 percent.
    * $100,000 to $1 million income will be taxed at 10 percent.
    * On $1 million or above will be taxed 15 percent.

    Trump’s new tax plan
    Under Trump, Fewer Tax Brackets
    Donald Trump proposes having three tax brackets, down from the current seven, and repealing the head-of-household tax-filing category. The standard deduction would be $30,000 for married couples filing jointly (up from $12,600 currently) and $15,000 for single individuals (up from $6,300).
    Trump’s Plan
    Tax Bracket

    Single

    Head of Household

    Married Filing Jointly
    12% $0 – 37,500 N/A (single-filer rates) $0 – 75,000
    25% $37,500 – 112,500 N/A (single-filer rates) $75,000 – 225,000
    33% $112,500+ N/A (single-filer rates) $225,000+

    Current Plan
    Tax Bracket

    Single

    Head of Household

    Married Filing Jointly
    10% $0 – 9,275 $0 – 13,250 $0 – 18,550
    15% $9,275 – 37,650 $13,250 – 50,400 $18,550 – 75,300
    25% $37,650 – 91,150 $50,400 – 130,150 $75,300 – 151,900
    28% $91,150 – 190,150 $130,150 – 210,800 $151,900 – 231,450
    33% $190,150 – 413,350 $210,800 – 413,350 $231,450 – 413,350
    35% $413,350 – 415,050 $413,350 – 441,000 $413,350 – 466,950
    40% $415,050+ $441,000+ $466,950+
    Source: Tax Policy Center

  5. C.D. Baker says:

    The tax breaks would all break down to the owner and how they run there business. The good owner would know to make his/her company become better then, they should be willing to take the profits and tax breaks, invest it back into the company and it’s employees. They would know that by sharing in the profits with their employees would help give incentive to the employee to work harder, smart and more efficient which would make the business better thus allowing the business to profit more in the future. Thus Zig Ziglar’s statement, “if you help enough other people get what they want it will help you get what you want”.

    Unfortunately there are many greedy owners that don’t hold that philosophy which they will eventually find out it probably will work against them.

  6. Ralph M. says:

    This could all be solved by eliminating the income tax altogether and have a federal sales tax. The biggest plus would be elimination of the IRS completely. What a huge savings that alone would be. Then there’s all the people who aren’t on the tax roles and don’t pay any taxes at all. Tax dodgers, illegal immigrants, people paid ‘under the table, etc. would all be contributing. Even people visiting the U.S. would be helping out.
    There would be a few things that shouldn’t be taxed, like food and medical supplies. And maybe not even a straight, across the board, tax, but scaled on required needs.

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