The Tax Code Paper

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I like how President Trumps plan is laid out where he cuts deductions and simplifies to three tax groups based on income. He has separated it into 12%, 25%, and 35%, but he has also doubled the deductions, so it simplifies it and gets the people a lower tax bill. However, this move will not help the belief that it helps will not come about because it looks like a cut to the rich and an increase to the poor. However, the poor will receive double deductions but no personal deductions. Along with this corporate rate from 35% to 20%. And making service businesses pay a flat tax of 25%. This would be around $3.5 trillion in tax cuts (Nitti). I believe this is all good and simplifies the tax code some, however this is not attainable unless they have 60 votes in congress. They need to have only $1.5 trillion in cuts to push it through without democratic intervention since they have majority. That means they have to tax something else. They propose to Eliminate the business deduction for net interest expense, which would generate $1.1 trillion. Along with that tax deemed repatriation of foreign earnings at a one-time rate which would generate $0.2 trillion. The last thing is to repeal all itemized deductions other than mortgage interest and charitable contributions which would generate $1.5 trillion. This is outweighed by the other proposed tax cuts which are elimination of the individual AMT tax, elimination of the estate tax, also allow full expensing of business assets for up to five years which in total adds up $1.8 trillion in bonus tax cuts. This makes $5.3 trillion in cuts and $2.8 in revenue and puts the plan 1 trillion over the cut allowed by reconciliation (Nitti).

Analysis

I would not cut the business tax cuts to 25% but rather to 30% flat rate. Which would cut down a at least to 200 billion which isn’t as bad as a $400 billion cut. Along with that I would like to implement Paul Ryan’s proposed 20% for a corporate tax rate from 35%, with a taxation on all imports and exempt all exports from taxation. That would soften the blow from 1.8 trillion in cuts to only 800 billion. Which would result in the $1.3 trillion in total cuts, and revenues totals (Nitti).

I agree with President Trump completely excluding these few revisions to make it fit into the $1.5 trillion allowed for reconciliation. Although dropping the corporate rate to 20% would cause some problems because Trump promised a 15% plan for businesses, which could make the businesses that voted for trump for that reason feel cheated. Along with that making service or S businesses pay a flat 25% deduction would cause more stress on the IRS because under that people can deduct the wages they give to people and to themselves, this is a problem because it is undetermined of what is considered an alright pay for the business owner. If there is no limit on the owner he can take a big chunk and deduct it personally which could deduct to 39.5% or now to 35% instead of the 25% proposed by trump. The part of eliminating all deductions except for charitable donations and mortgage interest, would cause hell for everyone in high taxed states because the states and local income taxes wouldn’t be deducted. This would also cut the health care deductions which the people already think they pay too much for anyway. Along with that they want to get rid of the business interest expense, and this will make banks and Wall Street will have a hard time to find borrowers if they can’t deduct the interest they accumulate on their yearly taxes. So, for President Trump and Company will have a lot of trouble trying to satisfy anyone with the much-needed result, because no matter what they must make an unpopular cut or tax to meet the necessary $1.5 trillion in cuts necessary (Nitti).

Conclusion

As shown above the tax code is impossible to understand for any one person. Fixing it requires nerves of steel and the ability to make unpopular decisions and explaining it to the people. The most important thing is to be clear and explanatory with the people like Reagan did back in his time but if Trump doesn’t show what he is doing his tax plan will go down in flames and won’t pass at all.

The two ways to fix it would be to rewrite it completely or put in some tax cuts and new sources of revenue. President Trump has a lot on his plate as did Reagan back in 1986. However, the president back in 1986 made a livable tax code that survived. And now President Trump will also come out with some result and hopefully one that helps all people in some small way. The solution isn’t going to be small and just an improvement it must be a change in direction and that will not happen with everyone being happy but more with a compromise that people agree to live with.

Works Cited

Erb, Kelly Phillips. “Will Tax Reform Simplify The Tax Code?” Forbes, Forbes Magazine, 13 Sept. 2017, www.forbes.com/sites/kellyphillipserb/2017/09/13/will-tax-reform-simplify-the-tax-code/#7f87fd5a71a4

Fishman, J.D. Stephen. “Section 179: What Every Business Owner Needs to Know About This Depreciation Deduction.” Www.nolo.com, www.nolo.com/legal-encyclopedia/section-179-what-every-business-owner-needs-know.html.

Fishman, J.D. Stephen. “The Top Tax Deductions for Your Small Business.” Www.nolo.com, www.nolo.com/legal-encyclopedia/top-tax-deductions-small-business-30176.html.

Fishman, J.D. Stephen. “The Tax Code: Complicated, Impractical, and Ultimately Costly for Taxpayers and the IRS.” Www.nolo.com, www.nolo.com/legal-encyclopedia/the-tax-code-complicated-impractical-ultimately-costly-taxpayers-the-irs.html.

“How Long Should it Take to Do My Taxes?” Fivecentnickel.com, 15 Apr. 2012, www.fivecentnickel.com/how-long-should-it-take-to-do-my-taxes/.

Nitti, Tony. “Trump Tax Plan Revealed: Three Big Changes To Look For.” Forbes, Forbes Magazine, 2 Oct. 2017, www.forbes.com/sites/anthonynitti/2017/09/27/release-of-gops-long-awaited-tax-plan-reveals-exactly-why-tax-reform-is-so-hard/#68acfa784597

Novack, Janet. “The 10 Most Confusing Parts Of The Income Tax Code.” Forbes, Forbes Magazine, 28 Feb. 2013, www.forbes.com/sites/janetnovack/2011/04/18/the-most-confusing-part-of-the-income-tax-code/#1b012be66bb7.

“Our Complex Tax Code Is Crippling America.” Time, Time, time.com/4286921/complex-tax-code/.

Reynolds, Dean. “Tax Code Too Complicated for Many Filers.” ABC News, ABC News Network, 15 Apr. 1970, abcnews.go.com/WNT/story?id=129739.

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