Society

Trump Tax Cuts To Benefit Wealthy

| by Jordan Smith

The tax cuts planned by President Donald Trump will mainly benefit the wealthiest sections of society, a new analysis has argued.

The Tax Policy Center stated that plans to reduce the tax rate on pass-through income to 15 percent would result in a cost of almost $2 trillion over the next decade, CNBC reported.

Pass-through income refers to income that passes through a limited liability company or sole proprietorship.

"Lowering the tax rate on pass-through income would affect few taxpayers in the middle or bottom of the income distribution but provide large tax reductions to a relatively small number of households at the top of the income distribution," the Tax Policy Center wrote, according to CNBC.

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The biggest tax cut would go to the top 1 percent of the population, it added.

Congressional Republicans are also looking to cut corporate taxes to 20 percent, although Trump has pushed for a reduction to 15 percent.

But Republicans are divided over a measure that could see taxes rise for some. The interest deduction provision has been in place for over a century and allows businesses to avoid paying taxes on interest costs.

A group of House Republicans is calling for this measure to be repealed because it would generate an estimated $1 trillion, going some way to fund the personal and corporate tax cuts they plan to implement.

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The Tax Policy Center estimated that the tax cutting plan will cost a total of $6.2 trillion over the first decade.

"We're contemplating keeping it -- that's our preference," Treasury Secretary Steven Mnuchin said of the tax break, according to Politico. "But we'll look at everything."

Trump is opposed to doing away with the deduction. His real estate business has benefited from the provision.

"It's controversial," Republican Sen. John Cornyn of Texas added. "I think we need to be careful because there are a lot of businesses that borrow money as part of their business model."

When Mnuchin and Gary Cohen, Trump's economic adviser, unveiled the tax cutting proposal in April, they described it as the biggest tax cut in U.S. history.

They suggested that much of the cost could be recouped because the reductions would stimulate economic growth, resulting in higher revenues.

This idea has been challenged by some, who point to Kansas as an example that economic growth will not result from tax cuts.

In 2012, Republican Gov. Sam Brownback of Kansas presented a tax-cutting plan along the same lines as that of the Trump administration -- it included tax reductions for income passing through LLCs and pass-through businesses.

The tax cuts have resulted in the slashing of spending on education and other services.

"I chose to live in Kansas. We don't have beaches, we don't have mountains, but we have great public schools. Well, not any more. There was no shot of adrenaline -- you didn't have to be an economist to see that. The cuts have been so deep we may never get back to where we were," said Judith Deedy, a parent, according to the Guardian.

Sources: CNBC, Politico, Guardian / Photo credit: Shealah Craighead/Wikimedia Commons

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