If nothing else, Donald Trump is a bold individual known for his brash persona and “tell it like it is” demeanor. Depending on one’s view of Trump, his tax plan can be viewed as either a bold vision or a brash absurdity.
Here is the rundown on Trump’s tax plan with detailed analysis on each of the major points in his tax plan.
Trump’s Plan By The Numbers
Anyone who has followed Trump’s campaign closely will know that he has advocated for a drastic simplification of the tax code. In Trump’s attempt to put H&R Block out of business (his words), Trump will reduce the number of tax brackets to seven.
Marginal tax rates will be reduced from seven to four, and marginal tax rates will be reduced as well. Current tax rates range from 10 to 39.6 percent, whereas Trump’s vision includes marginal tax rates ranging from 0 to 25 percent.
Who benefits from this zero percent tax rate? All single individuals earning less than $25,000 pay no tax under the Trump plan, and jointly filing couples earning less than $50,000 will be included within the 0 percent bracket as well. Trump’s own campaign estimates that this will remove almost 75 million households from paying federal income tax.
Beyond the raw numbers, Trump has loudly trumpeted his wish to get rid of the capital gains loopholes. Along with that, he will also cut the tax rate on capital gains from 23.8 to 20 percent. Similarly, Trump wants to give wealthy Americans fewer deductions and loopholes as well.
While this may seem like a heavy hand coming from a Republican tax plan, the top rate under Trump’s plan is 25 percent. Compared to the current 39.6 percent rate, wealthy Americans will have a much lower tax bill as well. Couple that with the fact that Trump’s plan also would eliminate the estate tax and cut corporate taxes from 35 percent to 15 (while also applying this 15 percent rate to small businesses and freelancers as well), and Trump’s plan is ultimately reveals itself as a populist plan that benefits wealthy Americans as well.
With these key figures in mind, the question becomes whether or not Trump’s plan is feasible or at all realistic.
Trump’s Plan Vs. His GOP Rivals
In substance, Trump’s plan falls in line with the rhetoric of other GOP presidential hopefuls. In form, his plan closely mirrors the plan of Jeb Bush. While the plans are similar, Trump’s ratchets up the extremity of the tax breaks, and Trump proudly proclaims that his plan will produce a significant increase to what Americans take home after taxes.
However, there are serious questions about the effects such a plan would have on our ballooning national debt. With tax cuts of this nature, government revenue will fall dramatically, which could increase the federal deficit by $10 trillion. As a result, Trump’s plan should appeal to a wide audience on paper, but it is less clear how the country can actually afford such a tax plan, given the current debt of $18 trillion and counting.
With the lack of clarity surrounding how the country could afford such a tax plan, it seems reasonable to conclude for the time being that Trump is merely trying to trump (pardon the pun) his fellow candidates to win political points with the vast majority of voters.
While pleasing everyone may be a great tactic when leading the GOP field, the math behind solving our growing debt crisis requires more than populism.