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Trump Tax Plan Analysis: Eight Ways Republicans Failed

Eight Ways Trump Failed to Deliver on His Tax Plan

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.

trump-tax-reform

There is almost no resemblance between the Tax Plan we were promised (see the above PDF from Trump’s own website) and the law Congress passed.  Here are the most glaring discrepancies:
  1. The Promise: Simplify the Tax Code.
    1. The promise to decrease the number of brackets from seven to four did not happen.
    2. We still have seven personal income tax brackets, most of which have slightly lower tax rates.
    3. Provisions within the Tax Cuts and Jobs Act increase the complexity of filing for many Americans
  2. The Promise: Tax relief for Middle Class Americans.
    1. Trump’s Tax Plan actually has a very small effect on taxes for middle-class Americans.
    2. Increases Tax Rates on people earning between $195,000-$425,000.
    3. The Personal Exemption and many other popular deductions were eliminated.
    4. This will offset many of the benefits middle income earners might have seen from lower tax rates.
  3. The Promise: Doesn’t add to our debt or deficit.
    1. The lowest estimates show that the new law will add at least $1 trillion to our National Debt over the next decade.
    2. Most estimates put that number between $1.5 trillion and $2 trillion.
  4. The Promise: Eliminates income tax for over 73 million households.
    1. The new tax plan actually has the smallest impact on the lowest income earners.
    2. As a candidate Trump promised a 0% tax rate for all Single Filers earning up to $25,000.
    3. The law kept a 10% rate on the lowest income earners and slightly reduced rates for most other brackets.
    4. Unfortunately for us, the changes are offset by the complete elimination of the $4000+ Personal Exemption.
  5. The Promise: Eliminates the Alternative Minimum Tax (AMT).
    1. AMT requires filers who earn above a certain income threshold to calculate their liability twice.
    2. It was not eliminated but the income thresholds were increased.
    3. From $54,300 to $70,300 for Single Filers and $84,500 to $109,400 for Joint Filers.
  6. The Promise: Mortgage interest deductions will remain unchanged.
    1. Interest deductions for all EXISTING mortgages do remain unchanged.
    2. Under the former law, homeowners could deduct interest paid on mortgages up to $1,000,000
    3. The new tax plan reduces that amount to $750,000 on all new mortgages.
    4. The Trump Administration slid another huge tax hike into the bill for Anyone Who Pays Alimony.
    5. For Separation and Divorce paperwork filed AFTER 31 December 2018, Alimony payments will NO LONGER BE DEDUCTIBLE.
  7. The Promise Completely eliminates the Estate Tax.
    1. The tax plan doubles the Estate Tax threshold (from $5.5 million to $11 million), but doesn’t eliminate it.
  8. The Promise: Will create a flat 15% business tax rate for small business owners.
    1. Our Tax Plan Analysis  shows the law does provide some tax relief for pass-through entities by creating a 20% deduction on business income.
    2. However, the deduction is eliminated for professional service firms earning over $157,500 (single filers) or $315,000 (married).
    3. This affects Lawyers, Doctors, Accountants, Consultants, and others…
    4. The deduction is further restricted to no more than 50% of payroll costs.
    5. This was done to prevent business owners who currently take a salary from reclassifying all of their personal income as business profits.
Woman Frustrated By New Tax Plan

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 the Disaster 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
  • The new law only allows such deductions if the loss occurred as a result of a Federally Declared Disaster.
  • 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 disasterTHAT 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
Ways Trump Failed to Deliver on His Tax Plan

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.

Learn How to Make the New Tax Law Work For You.

Take Advantage of Existing Business Resources that can help you get started.

Are you already on the path?

How are you setting up your Monopoly board to win in this new era?

Leave a Comment and help the rest of us get in the game too.