Why The New Tax Plan Is A Bad Idea
On November 2, the Republican rolled out their new tax plan. While on the surface, the plan seems good, it is a bad plan overall that disincentivizes ambition and hard work.
This is a $1.51 trillion dollar plan to cut taxes for corporations and middle income families, according to the NYT. Sounds great, right? Wrong. That is exactly what is wrong with this plan.
The tax plan establishes three tax brackets: 12, 25 and 35 percent. It also establishes a top rate of 39.6% for the top income earners. This is a condensed version of the current tax system with seven different income based brackets.
In the new tax plan, those making $24,000 or less annually will pay no income tax, according to NYT. The tax plan also places married couple into the bracketed system, those filing jointly and making up to $90,000 will be in the 12% bracket, those making up to $260,000 will be in the 25% bracket, and those earning up to $1 million will be in the 35% bracket. For married couples filing separately, the bracket income thresholds would be half of each amount respectively except for the 35% bracket which would be $200,000 for unmarried individuals.The new tax plan will also eliminate the alternative minimum tax (AMT), according to NYT.
According to the NYT, this new tax plan will roughly double the standard deduction for the middle class. For middle-class married couples, it will rise to roughly $24,000 from $12,700. For middle class individuals, it will rise to roughly $12,000 from $6,530.
Additionally, the new tax plan includes expanding the child tax credit, expanding it to roughly $1,600 from $1,000, and it would also add a $300 credit for each parent and non-child dependent such as elderly family members or stay-at-home parents with the credit expiring in five years, reports the NYT.
The new tax plan will also repeal certain tax credits such as the 15% credit to individuals 65 or older who retired on disability. Under the current tax system, they can claim up to $7500 for a joint return, $5,000 for an individual or up to $3,750 for a married individual who is filing a joint return, according to the NYT.
One part of the current tax system which would remain unchanged by the new Republican tax plan, if it passes and is signed into law, is there would be no changes to 401(k) and retirement plans.
Now, if you haven’t already seen the problem with this plan, it divides people into tax brackets based on their income. The more you earn, the more you pay! Additionally, if you make $24,000 or less annually, you pay no income tax at all. This completely disincentivizes the motivation for people to work hard and make more money. No one is going to want to earn more money, when they know that the government is just going to take more of it. The new Republican tax plan, is a tiered system of taxing the rich, which does the opposite of incentivizing the pursuit of the American dream.