By Maggie Hsu
The tax proposal suggested by incumbent President Donald Trump may not be for everyone; it implements policies which are mainly beneficial towards the wealthier population of the country and may result in an increased national debt. In this plan, many taxes are repealed, and it also allows more money to be deducted from taxes, therefore allowing some people to pay less taxes. However, This is problematic as when people pay less taxes, there is less governmental revenue, so national deficits may increase when the tax plan is implemented.
This tax plan would change the amount of tax brackets, which defines how much people pay on different levels, from seven to three. Various taxes like the Alternative Minimum Tax, which restricts how many tax deductions certain individuals have to pay and increases the tax rate for higher-earning people, and the inheritance tax are also repealed. Trump also planned to double the amount of money in a standard deduction, which means that people can remove twice as much money from their income taxes via these tax deductions. The previous 3.8% tax on investment income, for people with an income over $200,000, is also repealed, which was used for the Affordable Care Act. Meanwhile, corporations, including small businesses, will have to pay a 15% corporate tax, reduced from the former 35% corporate tax rate. Companies also only have to pay taxes if the profits were acquired in the United States, creating a territorial tax system. Overall, there are many different changes made to the American tax policy by Trump which reduces the tax rate people normally have to pay, especially because of the repealed taxes and deductions set.
These policies carried out will benefit mostly wealthier individuals, while having varying effects on the average American. people with the upper tax bracket now have to pay less tax, with a reduction from 39.6% to 35% for their tax rate. The upper 1% (based on income) of the United States population gets 76.3% of the tax policy’s proposed benefits, and the top 5% gets 94.8% of these benefits as well. The removal of the Alternative Minimum Tax and the investment income tax also means that wealthier people who were previously affected by these taxes do not have to pay as much as before. These benefits are not distributed equally throughout the nation, as some people in the middle class will have increased rates of tax, especially because of the state and local tax deductions being overturned. The standard deduction will also be doubled, which benefits people with lower and middle incomes. The overall effects of the tax plan not only affect individuals, but also influence the national debt because of the various cuts and reforms placed. Overall, people who earn more money in the nation will benefit the most from these plans, as opposed to the average citizen in the middle class.
However, these tax reforms have also been criticized as it could increase the federal deficit by 3 trillion to 7 trillion dollars, increasing U.S.’ debt. One major area where the amount of tax will increase the deficit is in the corporate tax cut which would decrease revenue by 2.2 trillion dollars. The change in tax brackets will also lower the tax rate for people in the top bracket, which means that the deficit will increase by 1.5 trillion dollars.. The federal budget will be influenced by other policies offered as well, which end up totalling to a 3 trillion dollar increase in the federal deficit. This means that the overall changes in these taxes will only increase how much money the US owes by decreasing national revenue from some people.
By benefitting people with high incomes in the United States, the tax policies introduced provide a negative effect upon people in the country, especially because of a projected increase to the national deficit. These policies affect rich people more than most people positively because the tax proposal plans to cut and deduct many taxes for them as well, unlike other classes in America.