Thursday, April 27, 2017

The other certainty in life

The big deal in Washington is Trump's hastily sketched out tax "plan," which seems like a way to move money away the government and back to the hands of the wealthy.  He would create a three-bracket system, eliminate almost all deductions (except charitable donations and mortgage interest), and cut the corporate tax rate from 35% to 15% (unless you're a home business--the you can kiss your home office deductions goodbye).
It's a good outline--for people who have money.
Now I won't deny that the Internal Revenue code as it stands is a hot mess.  However, the solution is not this.
Some people would like to put a "flat tax" into place, asking why the rich should pay more.  I'll show you a little math from the 2016 tax workbook:
The highest tax bracket is for incomes of $415,050.00, and these individuals pay 39.6% of their income in taxes.  Minus a $43,830.05 standard deduction, a single person earning the minimum for this tax bracket will pay $120,529.75 in taxes.  That's a lot of money, right?  They pay more in taxes than most people make in a year.  However, let's look at it another way.  Their post-tax income is still $294,520.25, also a lot of money.   Now let's look at an office worker making $30,000 per year.  Their taxes for the year are $4,040, leaving them $25,960 for the year.  That's still less than one tenth of the first earner.  Both of these individuals need housing, food, transportation and healthcare.  Guess who will spend most of the year counting pennies?  (Hint--it's not the first guy.)
Now, let's look at the Trump plan.  The first earner will see a tax bill that drops from 39.6% to 35%, meaning a drop in taxes from $120,529.75 to $101,437.45.  However, what of the $30,000 earner?  Depending on the bracket, this earner could either see a drop in the tax bill from $4040 to $3000.  Or, if this unfortunate soul is in the 25% bracket, that earner's taxes could go up to $7,500 per year--nearly double the current tax bill!
A fashion consultant once said that we should dress for the body we have, not the body we want to have.  So too with national policy.  We should demand policies that positively affect the lives we have, not act like millionaires in a temporary slump and allow policies that only benefit the rich on the odd chance that we find ourselves among their members someday.

No comments:

Post a Comment

I'm not Monty Python. I hate SPAM.