Trump Tax Plan Analysis: What He Promised vs. What We Got
You’re probably well aware that the Trump Administration’s Tax Plan was just passed through Congress. We all knew it was coming. Candidate Trump based a lot of his campaign promises around a Tax Plan so simple that you could file your taxes with a postcard and H&R Block would go out of business. It was great rhetoric and I’m sure more than a few of us would appreciate spending less time filing each year. Still, the $1.5 trillion question is, “Does the new tax law deliver on Trump’s Campaign Promise?” My Trump Tax Plan Analysis say the answer is no…no, it does not.
In fact, I counted at least Eight Ways Republicans Failed to Deliver on Trump’s Campaign Tax Promises.
For Separation and Divorce paperwork filed AFTER 31 December 2018, Alimony payments will NO LONGER BE DEDUCTIBLE.
The Promise Completely eliminates the Estate Tax.
The tax plan doubles the Estate Tax threshold (from $5.5 million to $11 million), but doesn’t eliminate it.
The Promise: Will create a flat 15% business tax rate for small business owners.
Our Tax Plan Analysis shows the law does provide some tax relief for pass-through entities by creating a 20% deduction on business income.
However, the deduction is eliminated for professional service firms earning over $157,500 (single filers) or $315,000 (married).
This affects Lawyers, Doctors, Accountants, Consultants, and others…
The deduction is further restricted to no more than 50% of payroll costs.
This was done to prevent business owners who currently take a salary from reclassifying all of their personal income as business profits.
attribution: retrieved from dreamstime.com
Aside from failing to deliver on almost all of the President’s explicit promises, the tax plan he signed further breaks many implicit promises encompassed in the “Make America Great Again” campaign slogan.
There are some small, welcomed improvements for low and middle income earners. Increasing the Refundable Child Tax Credit to $1400 will definitely help a lot of families. But the tax plan eliminated some critical deductions that will hurt a lot of Americans when they can least afford it.
Along with eliminating the personal exemption mentioned earlier, Americans will also no longer be able to deduct costs for moving expenses or tax preparation.
The most problematic change (and the biggest headscratcher) in my opinion, is how this tax plan guts theDisaster Deduction:
Formerly, Americans who suffered losses to property and assets due to theft or disaster (such as a home fire) would be able to deduct those losses from their personal tax liability
So, if lightning strikes your house. It burns down and you lose everything. You can no longer deduct that loss from your tax liability.
But…lightning strikes a tree in California which sparks a wildfire and the Federal Government declares a disaster. THAT fire burns your house down. Now you CAN deduct that loss from your tax liability
This change is going to hurt thousands of families over the coming years, and I can’t fathom any tangible long-term benefit to making this particular change
attribution: retrieved from dailykos.com, screenshot from @RepMarkTakano
As we move into this year’s tax season, it would benefit all of us to pay close attention to the deductions that apply to us today, and ask questions about how differently our tax liabilities would be affected if this was 2019.
One thing is certain, the new tax structure is designed to benefit anyone who owns a business. If you’ve been on the fence about starting your own, now is the time to make your move.