Donald Trump’s promise to “Make America Great Again” can’t be done without fixing the inordinate and unfair tax burden on the middle class.
Lopsided tax policies that grant more wealth-generating opportunities and more tax relief to the wealthiest Americans, while the vanishing middle class pays higher taxes to make up for the government’s loss of income on the nation’s top income earners and wealth accumulators have killed the American Dream for tens of millions of the country’s hardest working citizens.
Where the Money Is Now
Before we look at individual tax rates and policies, let me say this about the new President’s business tax promises, which we talked about at length on Wednesday.
On their own, they make sense. Cutting business taxes to promote business formation, increasing net profitability so companies can reinvest in their expansion, hire more workers and pay them more, makes good economic sense.
However, in the context of taxation in general, cutting business taxes almost immediately enriches business owners, corporate equity stakeholders, and shareholder “renters” who have the capital to play the markets long before the hoped for trickle-down effects of business tax cuts reach average wage-earning Americans.
In other words, business tax cuts are tax cuts for the upper-classes – especially the top 1%.
Speaking of the top 1%, Oxfam (an international confederation of charitable organizations) released a report this week to coincide with the World Economic Forum in Davos, Switzerland that said the world’s eight richest billionaires control the same wealth between them as the poorest 3.6 billion people in the world.
Six of the eight, whose total worth is approximately $426.2 billion, are Americans who combined own 70% of that pile.
- Microsoft founder Bill Gates with $75 billion
- investor Warren Buffett worth $60.8 billion
- Amazon.com founder Jeff Bezos worth $45.2 billion
- Facebook founder Mark Zuckerberg with $44.6 billion
- Oracle founder Larry Ellison worth $43.6 billion
- Media mogul Michael Bloomberg with $40 billion.
The other two billionaires are:
- Spanish retail magnate Amancio Ortega with $67 billion
- Mexican investor Carlos Slim Helu worth $50 billion.
Being an entrepreneur and dyed-in-the-wool capitalist, I commend these billionaires for their success, which they richly deserve.
Who Truly Deserves a Break
My point is twofold; they don’t need a tax break and they can afford to pay more in taxes. The top 1% of wealthy Americans can afford to pay a lot more and the top 10% should pay more, too.
The middle class, meanwhile, isn’t making more money. Wages have been stagnant to actually slipping for more than a decade. They’ve had no tax relief to speak of, certainly not in relative terms. And what’s in Donald Trump’s proposed tax “simplification” plan is a joke.
Right now there are an array of federal tax brackets: 15%, 25%, 33%, 35% and 40%. Each bracket is broken down into three categories for single filers, heads of household, and married filing jointly.
The Trump plan calls for three brackets: 12%, 25%, and 33% and only two categories, single-filers and married and filing jointly. Trump’s plan also raises the initial amount for each of the tax brackets.
While the plan is simpler, it doesn’t give the middle class a break. In fact, I call it a slap in the face.
According to Lily Batchelder, a law professor at NYU and visiting fellow at the Tax Policy Center, recently interviewed by NPR, “A family earning between $40,000 and $50,000 a year would get a tax cut of only $560 and millions of middle class working families will see their tax bills rise under Trump’s plan – especially single-parent families.”
An extra $560 bucks to spend if you’re a family is a joke. It’s worse if you’re a single parent.
Batchelder calculates that a single parent earning $75,000 with two school-age children, would be slapped with a tax increase of over $2,400. The increase in taxes comes partly because “the Trump plan eliminates the $4,000 exemption for each person in a household.”
“If you look at the wealthiest, the top 1%would get about half of the benefits of his tax cuts, and a millionaire, for example, would get an average tax cut of $317,000,” Batcheleder says.
Trump economic adviser, Steve Calk argues the loss of the exemption is partially offset by other changes in Trump’s plan. Specifically, “the Trump proposal to reduce the corporate tax rate from 35 percent to 15 percent, will help taxpayers by boosting economic growth,” Calk says.
That’s not Making America Great Again, that’s enriching the already rich by leveraging the middle class, again.
Today is the first day of Donald Trump’s presidency. I believe all Americans should support him and wish him well, because he is our President.
But that doesn’t mean we should support his tax plan. And I don’t.
Americans desperately need a simplified and far fairer income tax regime.
That means taxing the rich more, taxing the uber-rich a lot more, and taxing those who are struggling a lot less, if anything at all.