Following the failure to repeal Obamacare, Republicans have moved on to tax reform. While they weren’t able to repeal Obama’s health care takeover, the GOP may have a shot at overhauling our complicated tax system. And that includes President Trump, who is planning a big push for tax reform.
It couldn’t come any sooner. The stock market rally we’ve witnessed since Trump’s win on November 8th has been partially due to the anticipation of tax reform. It’s only rational that the market has reacted with exuberance. Stock traders continue to hope that President Trump follows through on cutting taxes.
Without tax reform, the stock market rally could fade. Or it could be even worse, and we could dip into recession. President Trump is no doubt aware of this, and he’s reaching across party lines to come to a solution. Keep in mind, Trump’s proposed tax reform plan is as follows:
1. If you are single and earn less than $25,000, or you are married and jointly earn less than $50,000, you will not owe any income tax. That removes nearly 75 million households – over 50% –
from the income tax rolls. They get a new one-page form to send the IRS saying, “I win.”
2. All other Americans will get a simpler tax code with four brackets – 0%, 10%, 20% and 25% – instead of the current seven. This new tax code eliminates the marriage penalty and the Alternative Minimum Tax (AMT) while providing the lowest tax rate since before World War II.
3. No business of any size, from a Fortune 500 to a mom and pop shop to a freelancer living job-to-job, will pay more than 15% of their business income in taxes. This lower rate makes corporate inversions unnecessary by making America’s tax rate one of the best in the world.
4. No family will have to pay the death tax.
While all of that that entails massive tax cuts, the plan is presented as revenue neutral, and is “paid for” by a near abolition on tax write-offs and loopholes for higher income earners. The tricky part will be convincing Democrats to support the plan. That’s why President Trump is courting the other side, starting with tonight. According to Politico, President Trump is hosting a dinner featuring both Republican and Democrat senators.
Attendees include “Democratic Sens. Joe Manchin of West Virginia, Heidi Heitkamp of North Dakota and Joe Donnelly of Indiana” as well as “GOP Sens. Pat Toomey of Pennsylvania, Orrin Hatch of Utah and John Thune of South Dakota.”
It’s doubtful they’ll reach a deal tonight, but this is a good step forward.
The meeting is also very calculated. The three Democrats invited are up for reelection next year in states that Trump dominated in 2016. They’ve also been much more supportive of President Trump compared to other congressional Democrats, and all three supported Justice Neil Gorsuch for the Supreme Court.
Passing tax reform is going to be one of the toughest legislative battles in decades. Trump needs to win support from the other side or he’ll never strike a deal and bring tax relief to middle class American families.
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