Rich would benefit most from Donald Trump tax cut plan: Policy group

Trump speaks to the National Association of Manufacturers in Washington.
Trump speaks to the National Association of Manufacturers in Washington.PHOTO: NYTIMES

WASHINGTON (REUTERS) - The wealthiest Americans would benefit the most from President Donald Trump's proposed tax cuts while many upper middle-income people would face higher taxes, independent experts said on Friday (Sept 29) in the first detailed analysis of the plan.

A US Senate panel took Trump's proposal, announced on Wednesday, a step forward by unveiling a budget plan for the coming fiscal year that acknowledges lost revenues from tax cuts, while Trump pressed ahead with selling the plan to the public.

A report from the non-profit Washington-based Tax Policy Centre found that in 2018, about 12 per cent of taxpayers would face a tax increase of roughly US$1,800 (S$2,440) on average.

 

That includes more than a third of taxpayers making between about US$150,000 and US$300,000, mainly because most itemised deductions would be repealed including for state and local taxes, it said.

Its analysis showed that the Republican tax proposal would fuel the growing federal deficit, providing US$5.99 trillion in tax cuts while reducing federal revenues by a net US$2.4 trillion in the next 10 years.

Trump, who promised major tax cuts as a candidate, has called his proposal "a miracle for the middle class," but the report concluded it would provide middle-income taxpayers uneven tax relief. In 2018, all income groups would see their average taxes fall, but some taxpayers in each group would face tax increases, it found.

Taxpayers in the top 1 per cent of incomes - above US$730,000 - would receive about 50 per cent of the total tax benefit from the tax overhaul, with their after-tax income forecast to increase an average of 8.5 per cent, the group said.

"The biggest share of people with increased taxes will be... people who might be considered upper-middle-income people, high-income professionals, people whose income is between US$150,000 and US$300,000 in a year in 2017," Tax Policy Centre co-director Eric Toder said.

The bottom 95 per cent of taxpayers could expect a tax cut of 0.5 to 1.2 per cent, according to the analysis.

The proposed tax cuts for corporations and small businesses would reduce federal revenue by US$2.6 trillion over a decade and largely would benefit high-income taxpayers, it said.

Trump, a real estate mogul-turned-politician, had pledged that the tax plan would not benefit the rich, himself included.

BUDGET RESOLUTION

The budget resolution released by the Senate Budget Committee, which would pave the way for Republicans to avoid potential Democratic procedural moves to block it, builds in US$1.5 trillion in reduced revenue from tax cuts over the next decade.

The White House and Republicans in Congress aim to have the tax proposal passed by the end of the year. Republicans control the White House, the Senate and both chambers of Congress.

The resolution is vital to plans by the Republicans to move tax legislation through the Senate, which they control by a slim 52-48 majority, using a parliamentary process that lets them pass legislation without a customary 60-vote threshold that would necessitate some Democratic support.

The proposal calls for slashing the corporate tax rate to 20 per cent from 35 per cent, the small business rate to 25 per cent from 39.6 per cent and the top individual rate to 35 per cent from 39.6 per cent.

Democrats call the tax plan a giveaway to the rich and corporations that would balloon the federal deficit.

"The Senate Republican budget is the clearest sign yet that Republicans are intent on pursuing a tax plan that would blow a huge hole in the deficit and stack up debt, leading to cuts in programs that middle-class Americans rely on," Senate Democratic leader Chuck Schumer said in a statement.

Trump talked up the tax proposal during a speech on Friday to the National Association of Manufacturers business lobbying group in Washington, calling it "a giant, beautiful, massive - the biggest ever in our country - tax cut".

"The biggest winners will be everyday working families, as jobs start pouring into our country," Trump said.

The US national debt stands at about US$20 trillion and the proposal provided few details on how to offset the federal revenues that would be lost with the tax cuts.

Trump has failed to secure passage of any major legislation since taking office in January, with a healthcare overhaul collapsing in the Senate, money to build his promised wall along the border with Mexico failing to materialise and infrastructure spending legislation never getting off the ground.