Paul L. Caron

Thursday, September 28, 2017

Kleinbard: The Republican Tax 'Plan' Is A Deficit-Busting Mess

Vox op-ed:  The Republican Tax “Plan” Is a Deficit-Busting Mess. And It Would Slash the President’s Taxes, by Edward Kleinbard (USC):

Here is what you need to know about the Republican tax plan released Wednesday: It’s not a tax reform plan at all.

It is a sketch of an outline of a preliminary notion of a tax cut for some — and a tax hike for others. The components read like the jumble of ideas you might expect a table of slightly inebriated Chamber of Commerce types to shout out when polled for their tax reform suggestions.

The plan is sketchy, as I say, but this is the gist: Where individuals are concerned, the seven current individual income tax brackets will become three: 12 percent, 25 percent, and 35 percent. The standard deduction will be raised to $24,000 for couples and $12,000 for individuals. There will be a substantially bigger child tax credit.

It’s not just the nerdiest details that are missing: We don’t, for example, know what the top tax rate would actually be (the proposal dangles the possibility of a fourth tax bracket, for high earners, on top of that 35 percent rate). We don’t know where the new tax brackets begin and end, or the magnitude of the enlarged child tax credit. In many cases it is impossible for me or anyone else to tell you whether you will be better or worse off, given the lack of detail. ...

In short, where personal taxes are concerned, the proposal is a surefire winner for the very top of the income ladder, including the president. It’s also a budget buster, and it may turn out on balance to raise the income tax burden on you, the reader.

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I think this is an overstatement. Most tax reform involves lower rates in return for base-broadening, as does this one. If the Democrats have a better plan , which they may, they are certainly free to offer it.

Posted by: mike livingston | Sep 29, 2017 4:08:27 AM

When I teach my individual class, I always tell my students that the most important itemized deduction is the casualty loss. While mercifully one might practice for a full career and never see a casualty loss, it is an itemized deduction that allows individuals and communities a greater chance to rebuild.

Witness the failed attempt earlier this week in the House of Representatives to enhance the casualty loss for 2017 hurricane victims.

Should the casualty loss deduction disappear, we can set our watches for the first ensuing hurricane, earthquake, flood etc. to see Congress rushing to reinstate the casualty loss and the Democrats rushing to blame the Republicans for its absence from the Code.

Posted by: Hank Adler | Sep 29, 2017 8:09:02 AM

Any revenue-neutral tax reform harms people who benefit from current tax breaks. Grand bargains are impossible, having been proven illusory in 1993 when Bill Clinton overturned the 1986 trade of lower rates for elimination of tax shelters. I predict only small tax changes this year.

Posted by: AMTbuff | Sep 29, 2017 9:27:13 AM