US Republican tax plan to favor rich, cost $2.4 trillion

Plans unveiled this week for broad-based US tax cuts would mostly benefit the very rich while lowering government revenues by $2.4 trillion over a decade, according to an analysis released Friday.

Furthermore, while most income groups would see lower taxes on average in 2018, in a decade some middle-class taxpayers would on average end up paying higher taxes, according to the non-partisan Tax Policy Center.
Opposition Democrats continued to hammer at the plan on Friday, which they have described a giveaway to the rich.

The White House said Thursday the plan would be a boon to the middle class and create prosperity for all, by increasing growth to pay for the tax cuts.

But senior economic advisor Gary Cohn said he could not guarantee that every taxpayer would see a tax cut.

"Despite the president's promises, it is implausible that this plan would permanently boost the economy," Howard Gleckman, a senior fellow at the center, wrote in presenting the findings.

"Trillions of dollars in lost revenue would add to the federal debt, raise interest rates, and make it more costly for businesses to invest."

President Donald Trump joined Republicans this week in rolling out the plan, which calls for doubling standard deductions income earners can use to reduce their tax burdens, lowering the top tax bracket and cutting corporate taxes from 35 percent to 20 percent.

It would also reduce taxes on "pass-through" corporate entities, where a company's earnings are passed through to its owners, and eliminate the so-called Alternative Minimum Tax, which is designed to prevent tax avoidance by wealthy individuals who claim excessive deductions.

Industrial lobbies hailed the plan this week, saying it would revive struggling businesses and promote hiring. US industry has persistently campaigned for lower corporate tax rates and for a simplified tax code, arguing that they restrain economic activity and prevent hiring.

The Tax Policy Center analysis did not use so-called dynamic scoring, which involves assuming resulting economic growth will offset some or all of a tax cut's cost. The Trump administration has said this method informs its planning.

According to the analysis, the top one percent of earners, or those making more than $730,000 a year, would receive about half of all tax benefits created by the plan, with their after-tax incomes rising by an average of 8.5 percent.

Starting in 2027, those earning between $150,000 and $300,000 would see a slight increase.

The Republican proposal would also reduce federal government revenues by $2.4 trillion over the next decade and then by $3.2 trillion over the decade after that, according to the study.

Source: AFP