Members of Trump’s tax team are zeroing in on a framework for a major tax overhaul that could be brought forward in Congress this fall.
Just don’t expect the bill to provide any breaks. That is, unless you’re wealthy.
An early Trump tax plan that applies tax treatment to pass-through income could generate as much as $2 trillion in cuts for the rich. This would be done by “cutting the rate for income that ‘passes through’ limited liability companies, sole proprietorships and S-corps to 15 percent, to match the reduction in the corporate tax rate.” Trump has proposed reducing the corporate tax rate to 15 percent, but it is more likely to hit 22 percent.
He has also proposed limiting tax brackets to 10 percent at the low end, 25 percent and 35 percent. Under Trump’s proposal, the rich could “turn their ordinary income into pass-through income and get the lower rate than the 35 percent top tax rate.”
This loophole could generate a 4.8 percent increase to after-tax income for the wealthiest earners.
But that’s not all.
According to Politico, the group is deciding how to pay for these individual and corporate tax rate cuts — and the options aren’t great. They include: “capping the mortgage interest deduction for homeowners; scrapping people’s ability to deduct state and local taxes; and eliminating businesses’ ability to deduct interest.”
Daily Kos noticed in the Politico story something more sinister in the works to account for these rates.
One idea quietly being discussed would be taxing the money that workers place into their 401(k) savings plans up front: an idea that would raise billions of dollars in the short-term and is pulled from the Camp plan. This policy idea is widely disliked by budget hawks, who consider it a gimmick; the financial services industry that handles retirement savings; and nonprofits that try to encourage Americans to save.
As the Daily Kos puts it, this would amount to a widespread “transfer of wealth” away from ordinary working Americans to the wealthy who can maneuver to take advantage of the low tax rates Trump seeks.