Julia Lucas, Staff Writer
President Donald Trump’s new nine-page tax plan has received mixed reviews from Republicans and Democrats alike. Trump has gone on record saying that his plan, which primarily involves cutting taxes, will increase economic growth. The new plan features several major changes in tax brackets and cuts in funding and has been said to benefit individual earners, small businesses, law firms, hedge funds, manufacturers, and multinational corporations.
One of these changes involves income tax brackets. Currently, there are seven tax brackets that split an individual’s income. Under the new plan, the seven brackets will be reduced to three. The percentage rates of the new brackets would be 35 percent, 25 percent, and 12 percent respectively. The dollar amounts that would put people into these categories has yet to be specified, but the proposed plan is an attempt to split taxpayers into three brackets. Some Americans for many years have argued that the rich pay much less in taxes than the poor, which has sparked constant debates, including new ones under the plans proposed by President Trump. These kinds of debates have long been a staple in economic arguments in the U.S., as well as in other countries across the world with similar taxation methods.
Another one of the plan’s major changes is eliminating the alternative minimum tax. The alternative minimum tax takes away many deductions under the regular tax system and is essentially a safety net that was made to prevent the rich from avoiding taxes or greatly decreasing their taxes. While the plan would eliminate personal exemption and ensure only a person’s income and a little more is subject to being taxed, the standard deduction would be doubled. The standard deduction is the status of filers, such as a person filing as single with no children, married with no children, married with two children, and more. The standard deduction would be higher for all filers, except those with multiple children. The people without multiple children would almost have double the standard deduction than under the current system, but filers with several children will receive less of a deduction.
Beyond individual taxpayers, Trump’s new tax plan makes several changes to corporate taxes and “pass through” business taxes. The corporate tax rate would go from 35 percent to 20 percent and “pass through” businesses will have a rate of 25 percent. “Pass through” businesses are individually owned companies that pay taxes on their business’ income through their owner’s personal tax returns. This is said to greatly help the economy to keep small businesses on the same level as major corporations. There would also be a one-time repatriation tax for overseas businesses. This means that corporations that do a lot of their work overseas will only be taxed once for the profits they make and bring back over to the United States.
Most of the changes proposed in the new tax plan seem to be beneficial for the economy, individuals, and businesses. There are some major concerns brought up by economists though that have sparked some controversy over the plan in general. Economists have questioned how the White House would be able to make these tax cuts without going further in debt. The tax plan is estimated to add $1.5 trillion to the national debt before economic growth is taken into account. There are both benefits and risks to the proposed tax plan that could either boost the United States economy or harm it. The plan has yet to be passed and all tax payers are eager to find out what changes the plan could mean for them.