“This is our once-in-a-generation opportunity to deliver real tax reform for everyday hard-working Americans,” President Trump said last night as he began his push for Congress to pass legislation passed when it returns next week. Although the President sent a blue print of his tax plan to Congress in April, no bill has been drafted yet. But you did say a year ago in August:
“There is still a great deal of debate to be had on the details of a new tax code, but it is certain that it must be simpler, fairer, and flatter.”
The biggest change would be in income brackets. There are currently seven with rates ranging from 10% to 39.6%. The Trump plan would reduce that to three with rates of 10%, 25%, and 35%. This is an example of a “flatter” system. I’ve also heard some people describe it as “simpler,” though I’m not sure in what sense. Either there are brackets or there’s a single rate. If there are brackets, it doesn’t matter if there are 3, 7, 24 (as there were in 1980), or 56 (as there were in 1918). You skim down the row and find yours. Simple.
I’m much more concerned with the fairness of the plan and so how it would affect people’s actual taxes. Currently you are in the top income bracket. Your Congressional base salary is $174,000, but since your net worth is over 3.5 million, I assume you are declaring well over $418,400 each year, the bottom of the current highest tax bracket. So you would personally profit from the “flatter” Trump plan, but the overwhelming majority of your constituents earn a fraction of your income, and they would not.
Look at how the Trump tax cuts would affect your own staff. According to insidegov.com, your legislative director Lindsay Yates earned $61,667 in 2014; your district scheduler Jennifer Faulkner earned $70,500; your district director Debbie Garrett earned $74,000; and your communications director Beth Breeding earned $76,000. Lindsay, Jennifer, Debbie, and Beth were all in the third income bracket, $37,950 – $91,900, and are taxed at 25%. I’m in the same bracket. Under the Trump plan, we would all move to the new middle bracket, $37,500 to $112,500, but we would still be taxed at 25%. So no change.
In 2014, your deputy chief of staff Charlie Keller earned $119,00, and your chief of staff Pete Larkin earned $139,1000. They were both in the current fourth bracket, $91,900 – $191,650, and so were taxed at 28%. Under the Trump plan, they would both move to the top bracket, $112,500 +, and be taxed at 35%. For Charles, that 7% increase would mean paying $8,330 more. For Pete, it’s $9,737 more.
Charlie and Pete would also now be in your tax bracket. But instead of increasing, your tax rate would drop from 39.6% down to 35%. Again, pretending that you only earn $418,400, that 4.6% difference means you pay $19,246 less in taxes—double the difference of Pete’s tax increase. For someone in Trump’s proposed middle bracket, that’s some serious money. For someone in Trump’s bottom tax bracket, $0 – $37,500, that amount is life changing. For a millionaire like you, your accountant probably wouldn’t bother mentioning the change.
So under the Trump plan: Lindsay, Jennifer, Debbie, Beth, and I pay the same; Charlie and Pete pay more; and you, by far the wealthiest of us, pays less. While this “flatter” approach is certainly “easier” on you, how is it “fairer” for everyone else?