In my earlier blog regarding federal tax reform, I advocated reducing taxes for all levels of income, reducing our current seven tax brackets to just three, eliminating the odious death tax, allowing corporate monies earned overseas to be repatriated at less than the current confiscatory rates, and increasing the access to health savings accounts for more individuals, particularly those not employed by large and complex organizations, and doubling the amount allowed for individual deductions. I also argued the importance of maintaining deductions for charitable contributions and mortgage interest. I am very pleased that the Unified Tax Reform Framework recently announced by the Trump administration, while still short on details, seems to accomplish all of my most important desired positions. Most important is the administration’s advocacy for a change to a Territorial Tax System for our businesses working abroad. That brings the US in line with the rest of the international community, will allow businesses to invest hundreds of millions of dollars currently stashed abroad to grow businesses in this country, and eliminates an additional tier of taxes that has grossly handicapped US businesses from competing abroad.
Where I am disappointed is that the corporate rate is lowered only to 20%, not the 15% advocated earlier. That seems to be negotiating against ourselves even before we get started. There is no doubt that Schumer and Pelosi, and their Indiana main man Joe Donnelly, will argue for at least a 30% rate and that capitulating to 25% even before the negotiations begins weakens the administration’s position. Also, not stated in the Framework, but allowed by their spokespersons, is that the Trump administration leaves the door open for a 4th tax rate for those very wealthy, if necessary to secure democrat votes. Rest assured, that 4th confiscatory rate will be demanded by the democrats. Why even open the door to this gouging of the successful, when we know from past experience that the “wealthy will no doubt be defined at around $200,000-250,000 / year by the democrats, who never saw a tax they did not like? For some reason, the Trump plan also keeps the inheritance tax for capital gains. I am opposed to that.
The main fiscal argument that will be advanced against the proposed plan is that the Congressional Budget Office (CBO)—which hasn’t been right since its inception—alleges that the proposed changes in our tax system will add an additional 4.2 billion dollars to the deficit. Senator Schumer and Representative Pelosi are already pontificating against any changes that are not revenue neutral and do not add to the deficit. What hypocrisy! After eight years of driving our deficit to historic highs under President Obama, they have suddenly discovered the word deficit. Ignore the stench from that part of the swamp. Even though the CBO pronouncement will be proven wrong as usual, the income gained by increased profitability spawned by the tax cuts will more than offset any feared increase in the deficit.