What Donald Trump's Proposed Tax Cut Means For You

Tyler Durden's picture

Now that Trump is president, both individual and corporate tax-payers are taking a second look at Trump's proposed tax regime to see how it will impact their bottom line.

Here is a quick primer.

Trump has proposed personal and business tax reform that would reduce tax revenues by an estimated $4.4 trillion over ten years, or roughly 1.9% of GDP over that period. Alternatively, this also means that GDP will grow by roughly the same amount, all else equal, with incremental debt use to fund the shortfall.  Roughly half of this cost is estimated to come from his proposed corporate tax reform plan, which would reduce the corporate income tax rate to 15% and would impose a one-time 10% tax on all foreign earnings not yet taxed by the US.

Companies would be free to repatriate earnings without additional tax once this tax has been paid. Like the House Republican proposal, this would involve a transition to a new corporate tax system for taxing foreign earnings. The two plans are similar in several other respects as well, including a top individual marginal tax rate of 33%. However, the House Republican plan is estimated to cost around half as much over the next ten years as Mr. Trump’s plan, at least in part because it proposes to go further in limiting or eliminating existing individual and corporate tax preferences.

This is summarized in the chart below. The good news is that virtually all entities and income tax brackets will pay less taxes compared to Obama's 2017 Budget (assuming Trump does not change his mind on this framework). The bad news, is that even more debt will be used to replace it, and should foreign buyers balk at US obligations it will require more deficit monetization courtesy of the Fed and another QE episode.

Which brings us to the second point: will Trump's tax plan pass? According to Goldman Sachs, the tax legislation has a good chance of passing in 2017, but it is not expected to reduce revenues by as much as Trump has proposed. There are three potential obstacles to its passage:

  • First, the cost is likely to be prohibitive for some members of Congress. While the majority party is able to pass tax legislation with only a simple majority in the Senate using the budget reconciliation process described above, it would require near-unanimity among the 52 Republicans in the Senate next year to do so. The prevailing expectation is that some Republican lawmakers would balk at the deficit impact of his proposal.
  • Second, while the House Republican proposal would increase the deficit less, it has also generally been proposed in the context of the broader Republican budget proposal, which would also reduce spending in several areas. Mr. Trump has not proposed a significant net spending reduction.
  • Third, tax reform is complicated, and even under a unified Republican government, it may be too complex to resolve in a matter of months.

Ultimately, the outlook for a tax cut depends on how willing marginal Republican lawmakers are to increase the deficit, and/or how willing they are to find offsetting savings elsewhere. Overall, there is a good chance that some type of tax legislation passes next year, but the obstacles to comprehensive tax reform go beyond partisan disputes, so one should expect tax legislation that is adopted in 2017 to be narrower in scope than the campaign proposal, and significantly smaller in its revenue effect; in other words much of this week's market rally - driven by hopes of tax-cut boosted economic growth  and consumer spending - will be for nothing.

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Jim Sampson's picture

God dammit give me my capital fucking gains back!!!

roxyNL's picture

 

Obama created 10 Trillions of debt in 8 years, Trump will acculmulate that in 4 ...

it's called exponential perpetual debt system.

The problem is that he should first ask the Chinese if they want more US bonds, as a large part of US dollars ends up in the hands of many creditors nations like China.

Chinese will takover the US as they took over vancouver ... at the same time US consumers will be drowning in debt created by Tump's friends at Goldman Sachs.

roxyNL's picture

 

BTW all bankers are celebrating this week end in London, it's the end of Dodd-Frank. This is the best news for the last 8 years !

Wall street and the city we be a great casino again ... thanks to the casino god : President Trump.

Trump is doing what he did for the last 10 years, selling reality TV smoke !

His real freinds are not the rightwing people but the bankers and billionaires, Even in their best dreams they dindt see Hillary removing Dodd-Frank !

Escrava Isaura's picture

Reader be aware when the highlighted context is bullshit.

Article: reduce tax revenues by an estimated $4.4 trillion over ten years, or roughly 1.9% of GDP over that period. Alternatively, this also means that GDP will grow by roughly the same amount, all else equal, with incremental debt use to fund the shortfall.

Got it?

 

letsit's picture

Trumps' personal tax is higher than proposed House personal tax, except for his proposed business tax which is lower than House. Mmmm! Someone's looking out for personal business gain.

max2205's picture

How's about a 1 year tax jubilee ex ssid medicare.

crossroaddemon's picture

I submit that if a wall is built it's real purpose will be to keep you in...

BeerMe's picture

Because we are dying to get liberty in Mexico...

caconhma's picture

Trump started a mini-revolution he never had in mind starting. 

Now, the election is over and the most of election promises and lies will fade away. The zio-banking mafia could get rid of Trump at any time during the first campaign's 6 months but they did not. Why?

Trump does not hide that he is a showman and a shitty businessman. This is exactly why he did not pay any taxes during the last 10 years. It is that simple. His wealth was inherited from his parents was paid by the US taxpayers.

Let us see what he will do in the next 100 days. Does he keep his promises? Remember that Obama's Hope & Change resulted in his entire cabinet consisted of blacks and the WallStreet insiders?

Yes, Trump is a loose-cannon but is he a real friend of working people? We will find very soon. The white men will soon discover that Trump is not a Teddy Roosevelt!

joeyman9's picture

That is the way to recover from a banker induced depression.  NO INCOME TAXES THIS YEAR!!!!  It would be a lot cheaper than printing up money to cover deficits and the money gets to the people who will actually use it to create physical property not reinvest in the casino.  He could do it with an emergency executive order.  Of course once people get ahold of not paying income tax for an entire year, good luck getting them to do it the next year.  Imagine the unemployment among all the tax preparers!!!!

Urban Redneck's picture

Uhh... NO.  Most of Trump's income producing assets are in pass through entities which produce ordinary income (and phantom income), so he would pay the higher rate under his own plan.

dogismycopilot's picture

I thought you would be back in Brazil by now selling BJs for $20 bucks a pop. 

Swallowing the gravy and all.

Idiot.

Escrava Isaura's picture

If I may add: Trump is even better for the banks that Hillary could ever be. The only reason the bankers/Wall Street did not support Trump is because they thought Trump would lose badly.  

 

Ranger4564's picture

They didn't support Trump to make it appear he is an outsider. We'll see whether he's an insider or outsider soon enough.

Kirk2NCC1701's picture

They won't celebrate for long, because this is the 1st step on the new Texas Two-Step:

They are removing the DF Act, so they can install an UPDATED GLASS-STEAGALL ACT.

This is clever tactically.  They don't want too many political wars on too many fronts.  That would over-extend them.  Let the Banksters enjoy things for a while, to get the Economy and Infrastructure going.  Then you drop the Glass-Steagall Act on them.  

Besides... If people are dumb enough to fall for more Credit Default Swaps and other Derivatives-based "Products" and forms of betting or insurance, them to hell with them. Let them taste Darwinism!

crossroaddemon's picture

You're seriously reaching. You have no evidence... NONE... that this is what he has in mind. Basically you're projecting; you want it so you assume Trump plans to do it.

Escrava Isaura's picture

Sorry, Chinese taking over America?

It ain’t gonna happen because there’s precedent for that, remember Japan in the 80’s? One district of Tokyo you could by the whole Canada. If Japan had sold the Emperor’s Palace they could purchase the entire state of California.

And, do you remember what we were told? That the Japanese workers were far superior.

Superior?

Sorry, I am laughing so hard that I can’t finish this post.

 

scam_MERS's picture

I worked for a large Japanese electronics manufacturer during those days (yeah, the one whose CEO wrote "The Japan that can say NO") and I saw firsthand how cocky they were. Hubris, thy name is Morita ... was there long enough to see the shellacking the Japs took on the Pebble Beach deal ($341M loss, he he). Back then, all the talk was how Japan was buying up America - I never worried, it isn't like they can take it back to Japan with them. So why worry about China? Let them try to take over, not happening back then, not happening now.

Escrava Isaura's picture

Japan got away with all their debt “growth” creation in the 80’s because they had a surplus of dollars, just like the US got away with their suburbs and highway growth in the 50’s and 60’s  because America disguised all the dollar printing by saying that the dollars was pegged to gold.

Both fooled the world while Germany had to integrate Europe into the euro so the Germans can also keep living beyond their means.

China is doing the same play.   

 

caconhma's picture

I had a friend who was the Bay Area, CA executive VP for a major insurance corporation. He told me that he instructed his entire salesforce that if your were not an Asian then never try to sell anything to US Asians since they were buying EXCLUSIVELY from other Asians and never from somebody else.

Moe Howard's picture

I remember those times well. We used to drive around Pebble Beach at that time because I was in the Army at Fort Ord and we didn't have any money, cheap entertainment. Once the Japs took over, what a change in attitude - they did not want us there. The hate was on their faces. Glad they ate it.

Mr. Universe's picture

The Japanese moved big time into Hawaii as well. They bought thousands of acres for hundreds of millions of dollars. They developed many residential units, that failed and ended up as timeshares (mostly on the Big Island). While they certainly had a few successes, for the most part they got royally hosed. Seems like you can't even fart on the islands without it going through a native Hawaiian homelands commission. There, unless well connected, will get you nothing but stinkeye.

Kirk2NCC1701's picture

Perhaps.  It certainly means that Simon Black will dump Chile and move back to the US.

Under this plan, the US will attract a TON of offshore investment.  I can hear the rush of Cash flowing in.  Which means...

INFLATION, bitchez!

Escrava Isaura's picture

Kirk2NCC1701: Under this plan, the US will attract a TON of offshore investment…Which means..INFLATION

Not really because the Central Bank (Fed) can remove the same amount brought in by issuing bonds or downsizing credit creation.

Or, the Central Bank (Fed, in the US case) can let the bubble form, which is not a big deal for them, than crash it so all these offshore hot money disappears.

Keep in mind that, any Central Bank around the world can crash their economies in matters of days, if they wish so. Japan Central Bank crashed it’s stock market and real estate by 80% in 1990.

Whoever runs the window guidance (money creation and allocation) can crash its economy. Keep in mind that, from the end to WW-2 until 1980’s, the Finance Minister (Treasury, in the case of the US) of Japan had run the most vibrant economy in the world. But, once Japan changed to a US/British economic, meaning that the system was removed from elected officials to private-power, which, by indoctrination was called “Structural Changes” on the massmedia propaganda, Japan economy was finished. Now, BoJ is waiting for the Japanese government to fail, meaning the majority of the population to fail.

 

Clock Crasher's picture

Obama created 10 Trillions of debt in 8 years, Trump will acculmulate that in 4

doubling time is still 8 years that part has not changed

Edit:  So your right at the half way point of a 2 term presidency he would have added about 10,000 Billion with the next 30,000 Billion coming in the second wave

We will see if the people will accept it.  Can the soma-salesman pull it off?  Minimalizm will have to be the dominant meme from cradel to grave.  Because when the money supply expands larger and larger per month/quater/yearly it devalues the dollars of all exsisting dollars mathematically and reduces the standard of living and increasing the divide between upper class and everyone else.

Long gated communities.

jerry_theking_lawler's picture

There could be some gains with growth with a different tax plan that may see tax revenue grow a small amount....but the problem with the budget is not Revenue....we all know this.

 

Its SPENDING.

shamus001's picture

Is it possible to have so many idiots in one room? Tax deductions for corporates and individuals equal higher spending! That spending by people will enrich corporations, who with larger earnings will pay more in taxes even at a low rate.

Taxing a piece of meat until it becomes a gray stone doesnt yeild returns! Lowering taxes will result in greater business growth, and mumerically more jobs and sales wjich equal more net taxes taken in, and less tax money going out to feed jobless masses.

Escrava Isaura's picture

shamus001: Is it possible to have so many idiots in one room? Tax deductions equal higher spending! Lowering taxes will result in greater business growth.

Sham, you’re intoxicated by the Koll-Aid (propaganda). Sorry, you’re the idiot here because you don’t understand how money works.

Say you have $100 dollars. If you spend it, or you give these $100 dollars to the government to spend it for you, GDP stays the same. There’s no growth either way.

But, after you give the $100 dollars to the government you borrow another $100 dollars, now there’s growth because you just created an additional $100 dollar for a total of $200 dollars.

Tax cuts means nothing to the growth of business (GDP) because that money is already part of the economy. The only way for the economy to grow is to add more money and this cycle can never stops, because if it does, that economy will be in a depression.

 

hxc's picture

So nothing was produced before money? Why would they invent money if they had nothing to share? The economy isn't comprised of paper, you simple Keynesian fuck.

Escrava Isaura's picture

Money functions like a barometer, a valve within our complex systems. People go to work every day so they can earn money.

Now if you live in a farm, small village/community, like the Amish do, you don’t need money.

Now if you want the good life, yes you need money. Lots of it.

It’s what it’s, you like it or not.

 

 

 

ACES FULL's picture

I own two businesses and employ people in an impoverished area. If I get to keep more of the fiat that I earn then I spend and/or invest it. I give raises, buy equipment and expand my business and hire more people. If govt takes more in taxes some of it gets spent in America but much of it goes to military to police the world, goes to foreign aid, goes to NATO or UN. I would rather see as much as possible spent here. I could write off equipment purchases in one year up to 250k until Obama let that expire about 4 years ago, now have to depreciate them over a long period of years. Bought Caterpillar loaders, trackhoes, bulldozer etc. Thats one reason Cat's sales are down so much, destruction of the coal industry is another big reason.

You are very fond of saying that we live on a finite planet, too many people, and everything is driven by a debt fueled economy and I agree on most points. But its hard to tell people its all over and their standard of living has to go way down when the elites live in their mansions and fly around on their private jets then tell us to the opposite. The average person may not be able to put it into words but they instintively know they are getting fucked and that is one big reason why Trump won. He told them he could make it better and they need something to believe in.

So why not try it...after all...on a long enough timeline.........................................

billwilson2's picture

As someone who runs a company (managing, not owning) we only add staff if there is demand. If there is a lower tax rate, we pocket the gain, we do not expand. These days there is no demand. The poeple at the bottom are maxed out (68% of americans have less than $1,000 in savings - and that is a big part of why donald won). Only by pumping money in at the bottom instead of giving more to the top can the engine be restarted. Corporate profits as a share of GDP are at record levels. Giving them more is simply INSANE.

N2OJoe's picture

How can there be demand when people are being strangled by taxes? Lower taxes encourage NEW businesses to start up because expenses(taxes) are lower and there is a greater chance of success and return on investment.

In the short term, you are correct. If taxes are held low and expected to be held low, that is when you see growth.

As a SMALL business owner, if I had another $30 or 40,000 in my pocket from reduced tax burden, then I could hire another secretary or gopher to do some of the work that I don't want to do myself and this would free ME up to do more profitable work, increase revenues, and expand.

ACES FULL's picture

Exactly, I get Bill's argument but he needs to understand ours. We small businesses need several things. Lower taxes, reduced regulation and less UNCERTAINTY to grow. Also, I don't know about his business owners, but at this point in my life I am much more willing to pass extra money along to my employees, many of them deserve and need it. Most big corps don't think that way. Of course I will make more also and I'm not going to eat the extra cash, it will be spent on something, helping the economy even more. I don't care to have my cash sitting in a bank account.

Billwilson, I am lucky enough to be a unique business where I can virtually expand at will and we have plenty of demand. Yes, I would take some business from someone else, mainly the only big corp in my business, but I am far more generous and respectful to my employees and customers than they are. They only care about numbers, stock price, executive pay and their bottom line. I care about people.

crossroaddemon's picture

See, I would never hire regular employees. After doing so much to get free of wage slavery why would I impose it on somebody else? Plus the demands of having employees are probably morethan just doing shit mysefl. Bearing in mind my business is almost all profit and very little paperwork, so your mileage may vary.

crossroaddemon's picture

Right. You'e better off just funneling money into people's bank accounts than doing this. Of course that WILL NOT happen so...

crossroaddemon's picture

So give them something esle to believe in. There are other ways... hell, I have a comprehensive proposal. What they have now to believe in in equivalent to a monkey who keeps endlessly pulling a lever and never gets the goddamn banana.

Not My Real Name's picture

"The only way for the economy to grow is to add more money and this cycle can never stops, because if it does, that economy will be in a depression."

Really? So increased productivity can't grow an economy? Increasing the size of the labor force can't grow the economy? Improved technology does nothing to grow the economy? Labor specialization doesn't result in economic growth?

No, in your twisted Keynesian mind, the only way to grow the economy is by printing fiat currency. Of course, you also believe in perpetual motion machines too.

FFS. More than six years here and you still have no idea WTF you are talking about.

billwilson2's picture

They can ... IF ... the gains get distributed throughout the economy. If all the gains only go to the people at the top, the economy will not grow. It will get starved for end demand. Its a bit like tuning up your engine and expecting that to give you better performance .... except you forgot to put gas in the gas tank.

ACES FULL's picture

The plan lowers taxes for EVERYONE Bill. Thus more money in PRIVATE hands up and down the line and this money will be spent and/or invested. It won't all go overseas for foreign aid or go to a handful of connected political cronies.

crossroaddemon's picture

You do realize the people who really have no disposable income don't pay taxes, right? They get everything back on tax returns and then some. THOSE are the people who need to get greased a bit if you wanna kick things off. It's a frighteningly large percentage of earners.

ACES FULL's picture

Of course, it kinda goes without saying that you can't lower taxes for someone who doesn't pay taxes. You have already stated that you are a leech on society trying to take as much as possible and contributing as little as possible hoping that it will collapse so what I'm talking about doesn't really apply to you. Makers vs takers.

Not My Real Name's picture

By definition, the examples I provided above do get distributed across all classes. Almost all of the economic gains that go exclusively to the 1% are a result of Keynesian stimulus from "printing more money."

fattail's picture

Increasing the size of the labor force will grow the economy and income but it will all flow to the oligarchy.  Increasing supply of labor will suppress wages leaving all of those  who voted for trump worse off in 4 years as inflation eats into their stagnant wages.  We have one chance to fix the income inequality in this country, and to do it part of corporate profits have to be redistributed to labor.  If Trump does not fix it, he will lose the cracker coalition, and we will be stuck with whatever floats to the top of the democratic primary.  

jerry_theking_lawler's picture

Wow! You have been indoctrinated in the corporate fascism 100% haven't you.

Your model is 'technically' correct. But here is the difference. The .gov takes your $100 and wastes it. It has not value for humanity and is only siphoned off to the political elites. Your $100, which you had in your pocket originally but it was TAKEN by the government, is gone and as used as collateral to get another $100 which you invest and make a return on. Yes, both of these do contribute to GDP. But your $100 will grow and the .gov's $100 will decline in value over time.

 

Now, let's say you gave the .gov $10, you kept $90 and borrowed an additional $100 and combined these to invest. We know from above that your $190 will 'grow' whereas teh .gov's $10 will decline in value. From what I'm at, anything with positive growth and a higher value results in higher value (GDP) over time. This is how the system should work.....but we continue to be fleeced and bludgened by the tax man, regulations, etc where we can't invest and can't really grow. Now do you see what Donald is trying to do?? You are right, he is trying to avert the drop in growth....but he has a pile of debt on his hands now that others racked up without much growth...he's gotta find a way out of this somehow.

My solution, CA and OR want out of the Union. I say let them go. Cut them loose....but they must take their portion of the debt that was racked up in their name before they leave. Say split the debt into $/person, apportion to their number of people, plus say a 20% leavers fee....payable in PMs or straight debt obligations. I'm tired of them trying to FORCE me what to do and now that the roles are reverse they don't like it either....so let's just stop and let them go.

poeg's picture

There's the rub we ran into here in Canada. Many in Quebec wanted out of Canada but didn't want the portion of the debt they directly caused, still wanted transfer payments to make up their back end, still wanted free trade within Canada, still wanted use of the Canadian monetary system, still wanted the lion's share of GOV jobs and agencies within their borders etc... but when the answer to such was NO to their "all gravy, all the time" wants list, they backed off save for the Bloq members and the students who had yet to participate in even their local economy in any meaningful way.

crossroaddemon's picture

This has been tried beore and it never happens that way.

PennilessPauper's picture

Shhh! don't point out that the whole house of cards is a big fucking ponzi scheme.  The indentured servants don't like that shit.

Big prediction here the Federal deficit will increase under Trump just as it would under Clinton.

Just like it has after every presidential election since 1913 when the Federal reserve was forced onto the dip shit americans.