President Donald Trump’s tax package, which included a cut in the corporate tax rate from 35 percent to 21 percent, went into effect on Jan. 1.
As a result, corporate taxes paid have dropped this year by one-third. And the Office of Management and Budget has hiked its 10-year deficit projection by $1 trillion since January.
The annual deficit, up 20 percent so far in 2018, will reach $1 trillion next year. A level of shortfall once considered catastrophic even during an economic crisis is now the norm even during boom times. But apparently, the administration feels even more fiscal carnage is called for.
While corporations and wealthy stockholders benefited tremendously from Trump’s cuts, many middle-class taxpayers, particularly in areas with high taxes like Long Island, will be devastated by a $10,000 limit to the federal deduction for state and local income and property taxes that will hit home when they file their taxes early next year. Now the Trump administration is considering a plan to create another $100 billion in tax cuts almost exclusively for the wealthy.
The Trump plan under consideration involves reinterpreting the word “cost” in the IRS code so that people selling assets can adjust their taxable profits on capital gains downward by indexing for inflation. Former President George H. W. Bush considered such a change through regulation more than 25 years ago, but deemed an end run around Congress to be illegal. Trump would need 60 Senate votes to pass it, which is unlikely.
Analysis has concluded that more than 84 percent of the benefit would go to the top 1 percent of earners. More than 63 percent of that $100 billion would go to the richest 325,000 taxpayers in the country. It’s a very bad idea.