Trump's tax plan: This provision could slam Americans in high-tax states

Trump's tax plan: This provision could slam Americans in high-tax states”

The nation had its first look at a new tax plan proposed by President Donald Trump Wednesday morning. Much is still left to Congress to sort out, such as scaling back credits and deductions to offset some of the lost net revenues of US$2.2 trillion over a decade.

If significant tax-rate reductions occur as contemplated, Canada will be distinctly offside, especially when it comes to retaining entrepreneurs.

In a fact sheet, the White House said that the unified tax relief framework will end the "offshoring model" that encourages companies to keep their profits out of the country.

With that in mind, Trump took care to frame the plan in terms that recalled the populist rhetoric of his campaign and the "American carnage" of shuttered factories and stolen jobs that he painted in his inaugural address.

Mr Trump said the measure would help U.S. businesses "thrive, compete and grow". But for the bottom 80% of the income distribution, the increase in after-tax income is only about 1% - an average savings of $530 per tax filer.

The estate tax is now 40 per cent. Mr Trump is reportedly worth $3.5bn, according to Forbes.

McMahon said New York's upper middle class and wealthiest could potentially be the biggest losers under the income tax part of the proposal, because they pay relatively high state and local taxes.

That's a big chunk of change.

And the special rate the tax plan introduces for "pass-through" businesses would mostly help the wealthy, including Trump, as well. The lowest tax bracket will be 12%, sparking contention among those who note the apparent inconsistency between aiming tax cuts at ordinary Americans while raising the lowest available bracket. "I think it would be a miracle if it helped the middle class", said Senate Minority Leader Charles Schumer, D-N.Y.

"There has always been talk of how to carve out "good" pass-through income from "bad" pass-through income", Seth Hanlon, who works with the Center for American Progress, told CNBC. There are all kinds of tax laws that affect it.

Alison Davy, of Catskill, said Trump needs to release his tax returns before writing tax policy.

That's an important point.

The stakes are high, after Republicans a day earlier scrapped their latest effort to repeal and replace ObamaCare. Ron Wyden of OR, the top Democrat on the tax-writing Finance Committee. After all, 10 Democrats up for reelection in 2018 represent states that Trump won in 2016 - including five that he won by double digits.

More fundamentally, we argue, this would cause faith in the fairness of the tax system - a cornerstone of our voluntary method of taxation - to falter. It allows Iowa entrepreneurs, manufacturers, and small business owners to have the confidence and certainty to invest in their businesses, create even more jobs, and better our communities.

While Silicon Valley and Wall Street have reacted positively to Trump's election, the issue of corporate taxes is a thorn in the side of many businesses.

One source of alarm for the advice industry before the framework came out was the seemingly growing attention by lawmakers to the "cost" of individuals deferring a portion of their income pre-tax into retirement accounts. But, in the process, he's making things hard on himself - and his party.

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