why do the rich get tax breaks
President Donald Trump and Republicans in Congress hope to give the US tax code its biggest overhaul in 30 years. Trump says
is Бto make the tax code simpler and more fair for everyday Americans. Б But their plan three tax breaks that benefit the wealthiest Americans: the mortgage interest deduction, the charitable deduction, and the preferred rate for capital gains. These tax breaks are incredibly expensive. Each year, the and cost the US Treasury $100 billion and $70 billion, respectively. ThatБs more than we spend on, the federally funded preschool program, and on for low-income students to go to college. The preferred rate for capital gains means that the income you earn through a salary or an hourly wage Б a paycheck, basically Б is taxed at a higher rate than the money someone makes trading on the stock market. ItБs why a billionaire like Warren Buffett pays a than his secretary. But how, exactly, do these tax breaks work? Before we decide whether to keep them or get rid of them, we need to understand whom they benefit. Check out the video above to learn more Б and to find out if you can deduct the interest on your yacht mortgage. (Spoiler:. ) Two weeks ago, the Senate passed a tax-cut bill that would have delivered to the richest one percent of Americans. subsequently showed large majorities of the public opposing the GOP tax plan Б with a USA Today /Suffolk University poll declaring it the least popular piece of major legislation in three decades.
Virtually all of these surveys found that this widespread opposition was rooted in the perception that the bill would benefit the wealthy and corporations more than it would help the middle class. Republicans listened carefully to this feedback. And during deliberations in conference committee, the GOP leadership decided to change the bill in ways that would alter the distribution of its benefits: Now, instead of giving 62 percent of its tax cuts to the one percent, the Republican tax plan of its tax cuts to the Б one percent. Or so the finds in its new distributional analysis of the legislation. Now, that figure comes with a caveat: The Republican tax plan before 2025 is very different than the Republican tax plan after that year. Due to complicated Senate rules, GOP lawmakers had to prevent their tax package from adding to the deficit after 2027. But the party was ideologically committed to passing a permanent corporate tax cut Б and politically committed to giving the middle-class a tax break in the immediate term. They squared this circle by writing a bill that cuts taxes on virtually everyone in the short-term Б but only benefits the wealthy and corporations in the long run.
Most Republican lawmakers say that they only phased out the middle-class tax cuts as a budget gimmick: No administration, Democratic or Republican, is going to allow a giant middle-class tax hike to take effect. After all, president Obama could have let George W. BushБs middle tax cuts expire just by sitting on his thumbs Б instead, the prospect of that happening was treated as a fiscal crisis. And next year, most middle-class Americans really will enjoy a tax cut. The division of these spoils, however, is still regressive. The poorest Americans Б who generally pay sales and payroll taxes, but have no federal income liability Б will get about $60 each. The middle class would get an average payout of $930, which is equal to about 1. 6 percent of the cohortБs average income. Americans in the top 95th to 99th percentile (those earning between $307,900 to $732,800 a year) would see the biggest percentage income increase, with the average household getting $13,480б back. The biggest absolute tax break would go to the top 0. 1 percent, which will see an average after-tax gain of $193,380. So: In its БprogressiveБ phase, the tax plan redistributes $60 to the average poor family, and roughly $200,000 to the average super-rich household. Once the plan is fully phased in, however, taxes on the average household in the bottom 40 percent will go up; remain unchanged for the average household in the middle 40 percent; go down slightly for those in the 80 to 99 percent range; and fall sharply for the top one percent.
Republicans can say that they donБt intend for the 2027 version of their bill to ever take effect. But if we are going to evaluate the tax plan on the basis of the GOPБs stated intentions then we need to assume that the 2018 version of the plan will be maintained indefinitely Б with to Medicaid, Medicare, Social Security, food stamps, public schools, the Environmental Protection Agency, and virtually every other public institution that the middle class relies on more than the GOP donor class does. If you believe the GOPБs rhetoric, then its tax plan is a blueprint for redistributing resources away from ordinary people and to the цber -rich, by cutting services for the former and taxes on the latter. If you believe the GOPБs legislative text, then its tax plan is a blueprint for redistributing resources away from ordinary people and to the цber -rich, by raising taxes on the former and cutting taxes on the latter. For some strange reason, ordinary Americans donБt seem, no matter which of these perspectives they chose to take.
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