The startlingly brief, one-page tax plan that U.S. President Donald Trump produced on April 26 is, if not the elusive conservative dream of tax-return-on-a-postcard, certainly tax-proposal-on-a-postcard. But the outline, together with the proposals released during the presidential campaign, suggest the most sweeping tax cuts for the rich in the nation’s history. Former Presidents Ronald Reagan and George W. Bush were pikers in comparison.
During the presidential campaign, preelection polls showed that 51 percent of Trump supporters wanted him to raise taxes on the rich, but the current proposal drastically cuts taxes at the top while decimating federal revenues. It is difficult to know by how much precisely, as the plan declines to reveal what income levels would fall under the three simplified tax brackets—ten, 25, and 35 percent—that would replace the current seven, among other details. But analysis from the Tax Policy Center, a nonpartisan think tank, of Trump’s campaign tax proposal, which is similar to his current plan but slightly more detailed, revealed a total tax cut that would be somewhat larger than the Bush tax cuts of 2003–04, with the top one percent getting over half of the total reductions, compared to just one-quarter under Bush. Meanwhile, ordinary taxpayers are in for some nasty surprises.
At the top of the income spectrum, the proposal rolls back former President Barack Obama’s progressive tax changes. He had raised taxes on high earners, returning the top-two individual income tax rates to 35 and 39.6 percent, from the 33 and 35 percent secured under former President George W. Bush’s tax reforms, and imposing a 3.8 percent capital gains surcharge and additional 0.9 percent Medicare tax on those earning over $250,000 to help finance the Affordable Care Act. Trump’s plan would return the top marginal income tax rate to 35 percent and eliminate the higher capital gains and Medicare taxes on top earners. The budgetary implications are significant. The reduction in the healthcare-related taxes would rob Obamacare and Medicare of $275 billion over the next ten years according to the Joint Committee on Taxation. The elimination of the extra Medicare tax alone would accelerate the insolvency of the Medicare hospital insurance trust fund by three years, from 2028 to 2025.
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