According to tax experts, the tax plan put out by the Trump administration will benefit the rich and lead to even higher income inequalities. This is because the tax proposal seeks to cut taxes paid by businesses and individuals and would also eliminate a surtax that is used to fund Obamacare. Consequently, this would have the effect of transferring money from the government coffers to the pockets of the richest families in America and their heirs.
Though all businesses of all sizes and individuals of all income levels, the larger portion of benefits would be enjoyed by those the largest wealth holders and the highest income earners.
“The only Americans who are very clear winners under the new system are the wealthiest,” ex-chief of staff for the Joint Committee on Taxation of Congress and University of Southern California’s law professor, Edward Kleinbard, said.
A repeal of the estate tax, for instance, would have a consequence on only about 5,300 fortunes annually. But in a decade this would cost about $174.2 billion according to Tax Policy Center, a nonpartisan body.
The wealthiest Americans would also benefit from a reduction in the rate applied on non-corporate business taxes, capital gains and the 3.8% surtax applied on investment income of the higher earners with a view to subsidizing healthcare for the poorest. It is also estimated that more than half of the benefits contained in the proposal would have been enjoyed by the so-called ‘one percent’, who sit at the top of the wealth chain. Estimates also indicate that revenue of more than $5 trillion would be lost in the course of 10 years further widening the income and wealth inequalities.
But complicating the situation is the fact the tax proposal lacked details as it did not have cost estimates or indications as to the level of taxation for the various income bands and how the lost revenue would be made up for. The Trump administration officials explained that the details would be provided at a later date when the legislative part of the process begins.
However, the thinking behind withholding the details and specifics in the tax proposal could have been by design in order to avoid presenting bad news. And with Trump having ran on a populist platform he wouldn’t have wanted to appear like his plan was only benefitting the rich while hurting the low-income Americans who form his base of support.