No politician, both from the Republican and Democrat, actually believed Donald Trump, someone they like to call a clown, could go this far. There’s little doubt that his “Apprentice” effect helps Trump tremendously. At least, he doesn’t need to spend a penny marketing himself, unlike other presidential candidates.
As more and more Americans accept the billionaire businessman as their next president, Republicans now believe Trump has the best chance of winning the 2016 presidential election as their nominee. That’s because Republican’s initial preferred candidates such as Jeb Bush and Scott Walker perform poorly.
Their next best bet is a retired neurosurgeon Ben Carson and former Hewlett Packard CEO Carly Fiorina. If the presidential is held today, Democrat’s Hillary Clinton would beat Donald Trump, 49% to 39%, based on a NBC-Wall Street Journal survey. However, it would be neck-to-neck fight between Clinton-Fiorina (45% to 44%) and Clinton-Carson (45% to 46%).
But if present Vice President Joe Biden runs for president, he would be a sure win for Democrat. Fortunately to Trump, the general election poll was conducted Sept 20-24, before he unleashed his ambitious tax plan on Monday. So, what has the bombastic and fire-breathing Donald Trump to offer for the Americans?
Under the Trump plan, no federal income tax would be levied against individuals earning less than US$25,000 and married couples earning less than US$50,000. What this means is a staggering 31 million American households’ taxes would be reduced to “Zero”. Trump also proposes to cut individual income-tax from the present highest 39.6% to 25%.
Mr. Trump’s plan would consolidate and simplify the current seven rates to four – 0%, 10%, 20% and 25%. The 10% bracket would apply to incomes from US$50,000 to US$100,000 for a married couple, of which is applicable to couples earning US$18,450 presently. The new 25% top bracket would apply to married couples’ incomes in excess of US$300,000, which currently are subject to rates as high as 39.6%.
The tax rate for all businesses would be lowered to 15%, amazingly, lower than Singapore’s 17%. In comparison, the current top corporate tax rate is 35% while small business income is subject to rates of as much as 39.6%. Trump’s campaign can now trumpet that the lower corporate rates would provide “a tremendous stimulus for the economy”.
Mr. Trump also would end the “carried interest” tax break, which allows many investment-fund managers to pay lower taxes on much of their compensation. That would be one way to earn revenue for the treasury. In order to attract and encourage U.S. MNCs to bring back an estimated US$2.1 trillion in cash now sitting offshore, Trump has a carrot for them.
These US$2.1 trillion would be subjected to one-time mandatory 10% levy, with flexibility for the tax to be paid over a few years. Clearly, Trump hopes such incentive would boost jobs and investment in the country. To discourage overseas earnings of American corporations, the present tax deferment would be scrapped and immediately be taxed.
To make life easier for 42 million lower-to-middle-income households who now have to file their tax forms even though they are not taxable, Trump proposes they file their returns on a “single-page” only. The 31 million households projected to pay zero tax under the new proposal can use the same single-page tax forms, to be sent to the IRS saying – “I Win”.
No rocket science here. Millions of Americans would rejoice and cheer Trump’s proposals. Besides an average tax savings of US$1,000, the 31 million households would have fewer headaches in income-tax filing. Under this year tax code, 36% of American households who pay no income taxes will be raised to 45%. With Trump’s plan it would balloon to 50% benefiting 75 million households.
Of course, budget analysts are still scratching heads on how Trump plans to replace the trillions of dollars in revenue lost under his latest plan. Trump claims his proposal would not add any money to the deficit. His campaign website says eliminating loopholes for “special interests and the very rich” helps to pay for taxes cut. He acknowledges there would be huge spending cuts though.
The most popular deductions – a generous standard deduction of US$25,000, plus the mortgage interest and charitable deductions are to be remained under his proposal. Trump predicts his plan could send the nation’s gross domestic product (GDP) growth to as high as 6% a year, which is more than twice the current projections for 2017-2020.
Perhaps Trump’s plan might work because he is playing with quantity games, not quality. If the market booms due to lower corporate tax bracket, so much so that it triples, it would simply means three times of corporate taxes collection by the IRS. One may argue he could be hallucinating, but only he knows if this is his great vision, or otherwise.
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