The election of Donald Trump to our nation’s highest political office is undoubtedly one of the most surprising developments in U.S. history. This is a purely factual observation, completely removed from any sort of partisan bias. Many reliable polls taken just prior to the election showed Clinton with a firm advantage. And the fact that Mr. Trump is essentially a political outsider, having no prior political offices on his resume, seemed to cast serious doubt on the viability of his candidacy. Trump’s success has triggered a mass of heated reaction, both of a supportive and antagonistic nature. No matter how much the perception of his electoral success varies at the individual level, however, what is certain is that his victory will be regarded as one of the most unlikely in our nation’s history.
Trump’s staunchly pro-American standpoint captivated his followers and played a large role in building his base of voters. He repeatedly claimed that he would utilize the powers of the presidency to protect the American people – especially working and middle-class people – from internationalist economic policies and improve the American standard of living.
But how will these things be achieved? Trump has devised a tax plan which forms one part of his overall agenda for substantive change. But will his plan actually benefit the majority of American taxpayers? Let’s take a closer look at how the Trump tax plan will affect individual taxpayers.
New Tax Bracket System
Trump intends to reduce the total number of tax brackets from the current number of seven down to three. The three (ordinary) rates would be: twelve percent for individuals earning $37,500 or less; twenty-five percent for those earning between $37,500 and $112,500; and thirty-three percent for individuals earning above $112,500. Again, these thresholds apply to single filers, the income thresholds are doubled for married couples filing jointly.
This new bracket system may result in either a tax cut or a tax increase for middle income earners depending on which bracket they fell into the preceding year.
This system would give a substantial tax cut for high income earners as it would reduce the top rate of 39.6 percent down to thirty-three percent.
The full impact of the Trump tax bracket system is still impossible to determine because we currently are unaware of what sort of credits, limitations and qualifications the system will be coupled with. But at this point it appears that the new system will provide mixed results for middle income earners and generally positive results for very high income earners.
Increased Federal Deficit
Though Trump’s new tax bracket system may benefit quite a number of individual taxpayers, when combined with his corporate tax cuts this new system will add to the national deficit. If these cuts remain in place for the next ten years, projections show that federal revenue will decrease between $4.4 trillion and $5.9 trillion. Trump has stated that he plans to cut spending by approximately $1.2 trillion over the next decade; if these figures remain the same, they would result in an increase to the national deficit of around $5.3 trillion.
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