On top of everything else, it’s time to discuss taxes. I know. Too much news. Too much chaos. It’s overwhelming.
But this is important to your financial health.
Donald Trump and Congress hope to change tax law. By Christmas. It won’t be tax reform. Too “complicated.” It’s tax “overhaul” with sumptuous tax cuts for big corporations. Most of you will not like the results one bit because it won’t be fair.
I don’t mean you, really rich people. You will like it. I mean those struggling to just hang on and the middle class or, rather, those who used to be middle class.
Congress is still fiddling with details, most of which will be worked out behind closed doors. But broad strokes are there.
Despite what the White House promised, middle class taxpayers will not see $4,000 tax cuts. (The White House clarified it means families earning $83,000 a year would see $400 less tax owed annually over 10 years.)
Republicans such as House Speaker Paul Ryan persist in the delusion that if they cut taxes for the rich and corporations, they will bring back $4 trillion from foreign accounts to create high-paying U.S. jobs. And, so the belief goes, salaries of American workers will be raised. Employees who have been given two or three jobs but only one salary will get a normal workload and more people will be hired.
It’s called the trickle-down theory, and it doesn’t work. It never has. It won’t now. But even though many economists agree the scenario is unrealistic, Trump and Republicans persist in thinking this is the answer for economic growth. They insist more corporate profit will be reinvested in America. But what do companies with big profits do? They pay higher dividends to stockholders. Only 43 percent of Americans own stocks; 10 percent own 80 percent of stocks.
Actually, the economy has been steadily improving. Failure to fix major infrastructure problems and failure to educate enough Americans with necessary technological and innovative skills are behind the failure of the economy to boom.
Questions remain. Will Congress compromise on the deduction of state and local property taxes but not income taxes? Will pre-tax dollars that fund your 401(k) (in lieu of pensions) be taxed? Will any loopholes that benefit the wealthy be dropped? How will the middle class be punished?
As a side note, Trump is also considering raising gasoline taxes. And don’t forget, health insurance premiums will skyrocket because he cut subsidies for deductibles and co-pays for millions. Government fees, such as entrance to national parks, will soar. Larger trade deficits are coming. Financial aid fails to keep up with college tuition hikes.
Preparing for a partial offset of tax cuts, Congress has voted to increase the national debt by $1.5 trillion. Interesting how yesterday’s establishment Republicans who railed against deficits now are complicit in tax cuts that will raise the debt. (P.S. Trump is wrong; Americans don’t pay the world’s highest taxes.)
Despite compromise, details remain murky. Basically the tax plan would increase the standard deduction and reduce the number of tax brackets. But overhaul would push the bottom rung on the income ladder to a higher level. Some would pay five tenths of one percent less in taxes. Millions in the upper middle class who itemize would pay higher taxes. This plan is neither simpler nor fairer. No middle-class family will save enough to buy a house, fund a vacation or get a new SUV, as some White House nincompoop blithely insisted.
The “good” economic news is that there are more billionaires than ever in history, especially in Asia, where they outnumber U.S. billionaires, 637 to 563. Europe has a paltry 342. Together, 1,500 people, average age of 63, control $6 trillion.
Trump said his top advisers and Congress are working hard on “our beautiful new tax cuts, and I think they will be very special.”
Special for some. Even though the top rate won’t decline to 33 percent as billionaires hoped, hundreds of them, including foreigners, will get billions in tax cuts. A done deal, if you believe Trump, by Christmas.
Or, folks, contact your senator and representative to demand real tax reform, infrastructure fixes and higher skills for workers. Oh, yes, and you want to see Trump’s tax returns.
Ann McFeatters is an op-ed columnist for Tribune News Service.