For a better analysis than I can write on Trump’s replacement for Obamacare, see Matthew Herper on Forbes.com. His conclusion: Trumpcare is more like a Dem program of vastly expanded central power than Obamacare is at present.
Concerning tax reform, it looks like the Donald is in collusion with the Chamber. Some of his ideas like lowering corporate tax rate to 15% is welcome and long overdue. We lose businesses to inversion by having the highest corporate taxes in the world. He wants to get rid of the Death Tax. Kudos there. This is a tax that collects practically no revenue because the rate is so heinous and everybody has a trust. Good riddance.
But then Uncle Donald wants to reduce the number of brackets to 4 from 7. Big whoop. And by reducing the max from 39.6% to 25%, you know what he will have to do to remain revenue neutral is tax the bejabbers out of the upper middle class. Then too he promises to take a majority of Americans off of income taxes altogether. I get nervous at such talk. This is a Peronist dream. When a majority of people who pay no tax, show up on election day to dictate what the taxpayers are going to pay for their benefits, this becomes the politics of Argentina. What I’d like to see is everyone paying tax. Pay 5 bucks if you can’t afford anything. Then you will have some skin in the game and can hold your head high, “I pay my taxes just like Trump!” Both parties have been trying to outbid each other with this tax populism and few realize what disastrous ends result.
The reason few people start small businesses these days, is the tax and regulation burden. This is no big deal for a major corporation with a room full of accountants. But for a guy making $10,000 a year, working out of his pickup truck, filing a half-inch thick business and personal tax filing is One Big Deal. Will reducing the number of brackets lift 20 pages of depreciation schedules from the forms? Will it reduce the 10 pages of forms justifying income streams? Will it take Congress out of the loophole writing business? Would the IRS not be able to deny tax-free status to conservative groups any longer? Nope, nope, nope, nope.
Cap Gains goes down to 20% from 24. Big woop. Here’s the dirty little secret about cap gains. Only 14% of long term ownership taxes collected are from stocks traded on Wall Street. The far larger collection of revenue is from sale of assets like a farmer selling a piece of land or a small business guy selling his shop and tools. One year in his life, he cashes in and makes good money and that’s the year that IRS takes him to the cleaners with 39% tax rates on “recovered basis” and 24% cap gains on any amount larger than he paid. Why get into business when Big Government takes most of it in the end?
So in sum, Trump’s tax reform is just rejiggered rates that advantages fat cats and big corporations, but does little to spur entrepreneurism. The far better program is Rubio’s which eliminates cap gains and allows expensing of equipment. Ditto Chris Cristie’s proposal which is like this. Better by far would be a fair tax as espoused by Huck and Carly and possibly Cruz.