By Sahid Fawaz
The Los Angeles Times editorial board today wrote one of the clearest explanations of the Republican proposed tax plan.
And it’s a frightening look into what it holds for the working class.
“Speaking Thursday to an assembled crowd at American Axle and Manufacturing, a vehicle parts manufacturer midway between Detroit and Flint, Mich., Vice President Pence stressed that the tax cuts proposed by GOP leaders were aimed at the very sorts of people who drew the plant’s paychecks.
‘First and foremost, we’re going to give working families a historic tax cut,’ Pence said. ‘[N]umber one is, tax cuts for working Americans.’
To back up this assertion, Pence pointed to three features of the ‘framework’ that President Trump and top congressional Republicans released Wednesday — none of which helped his case. One of those features, in fact, is a tax break exclusive to the families and friends of multimillionaires.
The first two proposals cited by Pence are the increases sought in the standard deduction that any filer can claim (from $6,350 per taxpayer to $12,000) and the child tax credit (from $3,000 per child to some unspecified higher level). He did not mention, though, that the plan would also eliminate the personal exemption of $4,050 per person. For a mother with two kids, the $12,150 in lost exemptions would more than offset the higher standard deduction. Nor did Pence point to the proposed increase in the bottom tax rate, from 10% to 12%. So until Congress specifies how big the child tax credit will be, it’s not clear how taxpayers on the lower rungs of the economic ladder would fare.
The third feature Pence pointed to was the proposal to end the 40% estate tax. “Death will no longer be a taxable event in America,” Pence said before reminding the audience that the tax plan’s top priority was the working class.
That’s a bit like telling people you’ve got a plan to end homelessness, and a key piece of it is building more luxury condominiums.
Unlike the income tax, the estate tax is a levy on wealth — more specifically, wealth that’s about to be passed on to the next generation, not to a surviving spouse or to charity. But the estate tax doesn’t trifle with modest estates. The first $5.5 million per individual or $11 million per couple is exempt (with annual increases for inflation). Taxpayers can also avoid the estate tax by giving money and assets away before they die, with a total of up to $5.5 million being exempt.
As a consequence, the vast majority of American families aren’t touched by the tax; according to the congressional Joint Committee on Taxation, only 0.2% of U.S. estates were expected to pay it in 2017. And thanks to an array of exemptions and loopholes, even the estates that were hit by the levy paid only 17% of their value to the Treasury on average — far below the 40% statutory tax rate.”
For the rest of the editorial piece, check out in its entirety at the Los Angeles Times here.