Who Benefits From Trump’s Tax Plan?

Who are the Winners & Losers in Trump’s Proposed  Tax Plan

While the details are just emerging and the final plan is sure to change, the tax overhaul that Trump & the Republican party recently unveiled has clear beneficiaries; and early indications are it is NOT the “middle class”.  In fact, according to this analysis, Trump’s tax plan will see the majority of the benefits—i.e. tax cuts— to the rich; particularly the top 1% & 0.1%.

 In Indianapolis last Wednesday, Trump outlined his proposal and stated, “…the biggest winners will be the everyday American workers as jobs start pouring into our country, as companies start competing for American labor and as wages start going up at levels that you haven’t seen in many years…”.   This is your classic “trickle down economics” argument that has been made for decades; that by cutting taxes on big businesses and the wealthy, the average American worker will see the benefits work their way down to them in the form of higher wages and more jobs.  The only problem is that study after study has shown these benefits never really reach the middle class.  Staying true to theory of trickle down, Trump proposes slashing taxes dramatically for Americans who earn north of $730,000 a year.

What’s in Trump’s Tax Plan? 

Although far from finalized, the main points of the plan that affect Individual taxpayers are:

  1. Reduce the tax bracket from seven brackets to three: with tax rates of 12%, 25% and 35% percent with a possibility of adding a fourth bracket.
  2. Doubling the standard deduction from $6,000 to $12,000 for individuals and from $12,000 to $24,000 for those married filing jointly.
  3. Creation of a new tax credit for non-child dependents while increasing the current child tax credit.
  4. Elimination of most itemized deductions but keeping the mortgage interest and charitable giving deductions.  Tax incentives for retirement saving and education plans will be retained; i.e SEP, Traditional, Roth IRA’s and 529 college saving plans etc.

As far as business & corporate taxes, this proposal is just as ambitious.  In President Trump words: “This will be the lowest top marginal income tax rate for small and midsize businesses in this country in more than 80 years…”.  Under this plan, businesses and corporations would see:

  1. A decrease in overall tax rate from 35% to 20%
  2. A new tax rate of 25% for “pass-through” income for businesses like sole proprietorships and partnerships which currently make up nearly 95% of all businesses which are taxed at the rate of their owners.
  3. Limitation of the deductibility of corporate interest expenses, in exchange for the option to immediately expense business investments
  4. Preserves tax credits for research and development and low-income-housing from a business standpoint.

Although the tax plan has a vast amount of changes for individuals & business on many levels, the benefits overwhelming favor the affluent and business owners.

How is the Public Reacting to the Trump Tax Plan?

Proponents of this tax plan for companies are overjoyed: “An encouraging step forward in our shared goal of a tax system that delivers higher economic growth, job creation and wages that our country desperately needs.” said Jamie Dimon, the chief executive of JPMorgan Chase and the chairman of the Business Roundtable.  John Stephens, the AT&T chief financial officer, said it was “A big step toward meaningful reform that would encourage more investment and job creation in the United States.”

Opponents like Edward D. Kleinbard, a tax expert at the University of Southern California law school calls Trump’s Tax Plan “a very cynical document…The extraordinary thing about the proposal is that we know that it loses trillions of dollars in revenue, yet at the same time the only people we can identify as guaranteed winners are the most affluent.”  Even Republican Rand Paul recently came out against Trump’s tax plan calling it a “middle class tax hike”.


This analysis from the Tax Policy Center above clearly illustrates how the current tax proposal favors the wealthy; particularly  the top 1 percent and top 0.1% them.  Pay particular attention to the Share of Total Federal Tax Change.  It breaks down U.S. income earners into 5 categories—from those making the least in the lowest quintile to those making the most in the top quintile.  As you can see, the top quintile reaps a whopping 86.6% of these potential tax cuts!  The other 4 quintiles combined would only realize 13.4% of these cuts. Parsing these numbers even further for the top quintile the majority of tax cuts go to the top 1% (79.7%) and the top 0.1% (39.6%) which equate to an average tax cut of $207,060 & $1,022,120 respectively.  Most Americans don’t even come close to earning the amount of money the top 1% would gain in tax cuts. 

Time & time again, Trump has pledged on the campaign trail and as President that the middle class will see the rewards of his tax cuts and it was time for the rich to pay their fair share by closing tax loopholes amongst other things. However, it is hard to come to any other conclusion than this tax plan, if passed, would overwhelmingly benefit the wealthy and not the middle class. In fact, this plan may create even more tax loopholes that would directly benefit wealthy families.

How Does Trump’s Tax Plan Affect You?

If the previous health care battles are any guide, the political fight to get these cuts enacted will be fierce and has only just begun.  This means that the ordinarily taxpayer can most likely expect tax filing delays—similar or worse than in recent years—while congress bickers…especially for taxpayers who file early.  It will be a while before we can really dig into the ultimate affects of whichever Trump’s tax proposal is ultimately passed.  One thing is for certain: In it’s current form the only real beneficiaries to this proposal are those that make nearly a $1 million or more annually.  Because of all this uncertainty and the prospect for an increase in taxes for the middle class, hiring the services of a Tax Professional this tax season may be well worth the money as they can help you navigate this complicated tax climate as well as potentially unlock benefits you might ordinarily overlook.

If you’d like more information about out how Trump’s existing or eventual tax proposal will affect you, feel free to contact us via the web or call us toll-free at (888) APRIL-15 to speak to an R&G Brenner Tax Professional.

Please feel free to comment below on Trump’s proposed tax overhaul.

How to Fix an Ailing Social Security Program

If Social Security Is To Be Saved, Action Must Be Taken
If Social Security Is To Be Saved, Action Must Be Taken

When President Franklin D. Roosevelt created the Social Security program with the 1935 Social Security Act he revolutionized the way Americans would live for decades to come. While social security has served the American populace well, the system can no longer sustain itself long enough to provide the same benefits for the future generations of retirees without a major overhaul.

The miracles of modern medicine have created a disproportionate number of old folks using benefits relative to the healthy, working, taxpaying youngsters contributing to the program. Current projections put complete bankruptcy of the program around 15-20 years from today. After that point, the money currently held in reserve will be completely depleted and tax revenue will only cover 77 percent of scheduled benefits. It’s clear that the system is unsustainable, but how can it be fixed?

Increasing Social Security Taxes

If the program isn’t collecting enough money, the obvious solution would seem to be to raise the Social Security tax, which currently sits at 6.2 percent of workers’ income, plus a matched employer contribution. Even a relatively small increase, say of just one percentage point, to 7.2 percent over a 20-year period, would improve the situation significantly, reducing the current funding shortfall by some 52 percent. What this increase would mean for the average worker earning a $50,000 salary is a tax increase of  an additional 50 cents per week each year of the phasing-in period. More abrupt increases to the Social Security tax, up to 7.2 percent in 2022 and 8.2 in 2052, would lower the funding gap a full 76 percent, but that would equate to a $9.60 tax increase per week for the average worker.  Therefore, increasing taxes alone, would only delay the problem.

Remove the Tax Cap

Currently, annual earnings beyond $117,000 aren’t subject to the Social Security payroll taxes or factored into retirement benefits. That means that income subject to the Social Security tax is effectively capped. Removing the tax cap is one of the proposed solutions that is widely supported, with 80 percent of Americans polled responding favorably, including 76 percent of people with family incomes greater than $100,000. The elimination of the tax cap over a period of 10 years would mean the top 6 percent of earners would pay Social Security taxes on all of their earnings, consequently receiving higher benefits upon retirement. A whopping 74 percent of the Social Security shortfall could be eliminated this way.

Change the Retirement Age

Raising the retirement age is one of the less effective, less popular proposals on the table. Currently, the age for full retirement is 66 for most Baby Boomers and 67 for those born after 1960. Gradually increasing the retirement age to 68 or 70 over a number of years would only reduce funding shortfalls by between 7 percent and 25 percent, depending on how quickly the change was implemented. Regardless of political affiliation and income level, however, this idea is unpopular for obvious reasons—a full three-quarters of the adult population object to raising the full retirement age to 70.

Cut Benefits and Means Test

Cutting benefits is often suggested by individuals who see the program essentially as an anti-poverty measure, without taking into account the programs that provide much-needed benefits to the unemployed, those who are injured on the job or who have disabilities, as well as women, infants and children. Proponents of this option suggest a reduction or even elimination of Social Security benefits for high earners, starting with a reduction for individuals and couples with incomes greater than $55,000 and $110,000, respectively, and a complete elimination of benefits at the $110,000 level for individuals and $165,000 for couples. This “means test” would reduce the shortfall by a scant 20 percent. Opponents of this plan point to the origins of Social Security, intended to as a universal program to support all workers, regardless of income. It wasn’t designed to be welfare—it was designed to help hardworking Americans live a decent life after their retirement from a life of service.

There is no clear-cut single answer to the question of how to fix Social Security. Experts and politicians continue to argue that cutting benefits and raising the retirement age are viable solutions with equal vehemence as their opponents, who argue that expanding Social Security is what’s needed, or even an elimination of the payroll tax. What’s clear is that the system as it stands now is in jeopard. If we want to revive it we need to act quickly with a combination of the above (or not yet proposed) solutions.