No one wants to pay taxes, but everyone does it. People pay taxes on their income to help the government operate. Corporations pay taxes on their revenue and other earnings to do the same, albeit in a much different way.
Simply put, taxes keep the roads from crumbling and the country from descending into madness.
Yet sometimes, taxes are too high and hardworking folks can barely afford to keep a roof over their heads. Then there’s the case of multi-billion-dollar corporations not paying taxes, period. What is the government to do when their people are barely scraping by and their titans of industry don’t pay their fair share?
The Trump administration believes they have the answer in the form of one of the largest tax overhauls ever. Based on their recent proposal, President Donald Trump and his cabinet want to simplify taxes for all Americans and get big businesses to finally pay what they owe.
But is there really a tax reform where everyone’s a winner? That’s what we were wondering, so we looked at Trump’s proposal. Here’s what we found:
— Ophir Gottlieb (@OphirGottlieb) Apr. 26 at 02:42 PM
Tax brackets and deductions for individuals and couples would change.
There are currently seven tax brackets depending on your income. The proposed tax reform plan would change the number of tax brackets to three. At the same time, the standard tax deduction would be doubled. There would be additional tax-based credits for child care, dependent care, and other necessary programs to help certain individuals in need. Most itemized deductions would also disappear.
You could end up paying less or more in taxes.
The exact tax brackets haven’t been specified, but the existing brackets (10%, 15%, 25%, 28%, 33%, 35% and 39.6%) are in place for a reason. There is a chance that someone in the 15% bracket could, in fact, end up paying 25% in the future. There’s also the chance that someone in the 28% bracket could end up paying 25%. While this might sound like a minor difference, such an increase would be detrimental to the middle class, as those currently paying 15% and thus making $9,276 to $37,650 a year probably can’t afford to pay more.
The corporate tax is going way down.
Any corporation making more than $18,333,333 a year currently pays 35% in taxes. Except they usually don’t pay those taxes. Countless corporations use international tax dodge schemes to avoid paying taxes altogether, keeping their money in banks and companies overseas.
Trump’s tax plan changes this to 15%. By lowering the corporate tax rate, the government will hopefully get some or all money back to the U.S. The tax plan also calls for a one-time tax on money brought in from tax havens. This would be a penalty of sorts for companies keeping their money overseas, but put them in good standing with the Trump administration.
Corporations still don’t have any incentive to pay taxes.
Paying 15% is a lot less than 35%, but many companies currently pay almost nothing in taxes. If they could continue making money and saving most of it in overseas accounts, why would they want to part with a huge chunk of it just because the government wants them to? Previously touted tax proposals from the Trump administration included an import tax which would make tax repatriation more likely. That import tax is noticeably absent in the newest proposal, which removes any incentive for big businesses to pay 15%
Nothing is set in stone.
The tax plan must clear hurdles from both parties to become law. If and when it does, it could do everything from add trillions to the national debt and further impoverish middle-class Americans, according to a nonpartisan American tax organization. At the same time, it could also mean major tax breaks for the wealthy, especially those currently paying 39.6% or burdened by the alternative minimum tax. (The “AMT” would be abolished in the current Trump tax plan).
This is also one of many tax plans proposed by the current administration. It is likely going to change again in the future, as officials on both sides of the aisle take issue with it. While a new tax plan sound nice, it might not be nice for everyone, and the new tax rates could seriously hurt those who need breaks to scrape by.