The big story from yesterday: the Trump tax cuts. I’ll explain them, what I think of them, and what is likely to happen. So, first of all, right now, on your personal income tax, you have seven groups. All right, seven percentages, and you fall into one of those seven. That’s cut back to three. All right. The President wants to cut it to three. It would be a 10% rate, 25%, and 35%.
He does not say what the earning power will be to get into either of those groups, or any of those groups I should say, because there are three of them. The top group is 35%, that comes down from 39%. So it’s down four points.
Now I’ll explain why that’s not going to benefit the rich in a moment, but the second most important thing is that $24,000 of your first earnings for married couples is not taxed. So, if you earn $23,000, you don’t pay any federal income tax, at all. So you start paying taxes over $24,000. That’s when you start. And since the median income in this country is about $55,000, the tax burden is not going to be very much on the people not making a lot of money.
Now you cannot any longer, if this passes, deduct anything other than your mortgage payments on your house or houses, I think they’ll probably give you two, and charity payments. That’s the only deductions you can take. Right now, you can take a lot of deductions on a lot of stuff, that all goes away. No death tax, so when you die, and you want to give your assets to other people, that’s not taxed – on the federal level.
Remember, there are state taxes, and the Feds are not going to change the state taxes. Then the tax on capital gains and dividends, the highest is 20%. That comes way down from the Obama years. That’s not a bad deal. That really isn’t a bad deal. The fat cats who earn a lot of money can’t really game the system anymore.
Unless, well, you know, you buy a big rich house, and you’ve got a big mortgage. But it’s just two deductions, it’s not a lot. You also can’t write off private jets and all of that other business.
So, I think this is about as fair as you can get it, and it’ll put money in everybody’s pocket to spend, hopefully, so the economy will be stimulated.
So, I think this is a pretty good deal. Now, on the business side, the president wants to lower the business tax of 15%. That’s probably not going to hold. It’ll probably go up to 20 or 22%.
I know what he’s doing, he’s giving it real low, so it gives him bargaining power to go down and compromise a little (also known as the door in the face phenomenon).
The Democrats go nuts, because right now it’s about 35%, in some case a little bit higher, on businesses. So, you know the President is building a little wiggle room there. Then he’s going to give a one-time tax on money overseas brought back. He says it is going to be a low rate – he has not defined it yet. We don’t know. And he has not defined the business deductions. Can you still buy box seats at a baseball or football game and deduct them? We don’t know. But I would assume you are going to have to phase out a lot of that if you’re going to give businesses the big break, 35 to 20%, because I think it’s going to come in at 20, not 15%.
Again, the strategy is to stimulate the economy by putting more money into play, creating jobs with that money, if you get the trillions that are stashed overseas, to come back. That gives the American companies opportunities to expand. We got to something with the money, in theory, and it looks to me like it’s okay.
It’s no social justice in here, which is why the liberals are going to go crazy, because they want income redistribution – taking from the upper class, giving to somebody else.
But there isn’t that punitive taxation that Barack Obama put in against affluent people.
But overall, President Trump did stand by his campaign promise. I think they should get most of this through, but it will be a brawl.