Trump tax reform purposes: to reduce the tax burden; simplify tax procedures; to attract U.S. companies to reverse the profits, to prevent double taxation;
The reasons for the continuous tangle of tax reform: fear of large-scale tax deficits caused by the tax reform bill; debate over whether the tax reform act will eventually benefit the rich or the poor; whether the mortgage credit deductible policy will result in opposition from the interested parties; k) Savings plan.
In a simple comparison, except for the "Obama era", the tax reform will indeed play a significant role in boosting the economy, corresponding to a marked decline in the fiscal surplus. However, as the "Laffer Curve" states, with the passage of time, Surplus will pick up again.
Beijing time on December 2, Trump tax reform was passed in the Senate, took a historic step, and gradually approached the formation of the final bill.
Trump tax reform what you want to "change" what? Why change? Delay in landing, where is the difference? Before and after "change" what? We analyze one by one:
Tax reform want to achieve what kind of purpose?
Trump tax reform plan is the first major reform of the tax system in the United States in 30 years and is also Trump's most important commitment in the 2016 election. Trump began to emphasize when he ran for president of the United States. The main proposition is:
(1) corporate minimum tax will be reduced to 15%
(2) SME tax will also be reduced to 15%
(3) 100% reduction of enterprise optional fees
(4) corporate overseas income tax rate of 15%
(5) A one-time levy of 10% tax on the transfer of overseas retained earnings of enterprises.
The intent of the above policy is:
A purpose: to reduce the burden
Burden on the middle class:
The current standard deduction for personal income tax is $ 6,350 for individuals and $ 12,700 for families. The tax reform outline of April 27, the tax reform framework of September 27, and the current Republican tax reform bill all show that the standard deduction for personal income tax has doubled to the current level (approximate). In addition, the thresholds of various tax rates have also been expanded to varying degrees. This will benefit more low-income people and at the same time increase the tax credit for the higher-income people.
Trump claimed that the biggest winner in the tax reform will be the middle class goal. After the Republican tax reform was announced on November 2, Ryan, Speaker of Republican Party Congress, said: A typical family of four ($ 59,000 in revenue) will reduce taxes by $ 1,182.
Burden for the business:
Under the current tax system, U.S. companies adopt a progressive tax rate of eight and the top tax rate for small and medium-sized enterprises that exist as owners is 39.6%.
According to the OECD statistics, the average consolidated corporate, state, and federal income tax rates for the United States in 2016 and 2017 are both 38.9%, the highest among 35 statistical countries. In the world, 38.9% of corporate income tax rates in the United States are only the third lowest compared with the United Arab Emirates and Puerto Rico.
Goal Two: Attract U.S. businesses to switch back to overseas profits and invest in the country to stimulate the economy
Rooted in - double tax system
At present, the return of overseas profits by U.S. companies needs to be taxed at a rate of 35%. In addition, they may already pay tax once in the country where the profits are made, thus resulting in a double taxation system for U.S. companies' overseas profits.
The rate at which U.S. companies need to pay back the profits themselves is as high as 35%, which has led American companies to keep overseas profits overseas.
Goal Three: Clear the Complex Tax System & Simplify the Tax Return Process
Under the current tax system, the personal income tax rate in the United States is seven (including 39.6% for the affluent), in addition to deductible items for individuals and families; the corporate income tax in the United States adopts a progressive tax rate of eight.
In addition, there is an optional minimum tax (AMT) system for U.S. taxes, which means that you also need to calculate an alternative tax amount, and you need to choose one of the lower of the two when paying taxes. In this way, two different calculations and declarations of the tax amount are required. The tax filing procedure becomes extremely complicated.
At present, according to the House motion on tax reform, the AMT system will be abolished, personal income tax will be reduced to 3 files (+ 39.6% for the rich) and corporate income tax will be reduced from 8 progressive tax rates to 20% (+ for SMEs 25%), a series of measures that will clear the United States complex tax regime and greatly simplify the tax filing process.
How to promote tax reform?
1, how to promote tax reform?
Tax reform process twists and turns, now showing the House and Senate two programs:
2, the program made in the process of what changes?
After the Senate passed its own version of the follow-up Senate, both houses of Congress talked about the reconciliation of the two bills, so it is necessary to compare the differences between the two bills:
3, "Participation", "public" What is the difference between the two bills?
It is clear that the Senate bill clearly weaker than the House of Representatives reform, is a "discount" more obvious tax reform act.
"Wobbling" tax reform: in the end where the differences?
The obstacles and difficulties facing the tax reform include not only the struggle between Republicans and Democrats, but also the ununification of opinions within Republicans. In addition, the external resistance is also great.
Debate one: tax cuts will lead to large-scale deficit?
The tax cuts will inevitably lead to an increase in the U.S. government debt. As early as April 27, 2017, when the Trump tax reform program was announced, the budget issue of the tax reform plan has become the key to the final implementation of the tax reform problem. On May 23, the U.S. Treasury Secretary Mnuchin once said: "We will not propose to spend 4 trillion U.S. dollars or 5 trillion U.S. dollars in tax revenue plans in the future."
As the tax cuts will cause the debt ceiling to touch, the passage of the 2018 fiscal year budget is crucial for tax reform:
Thus an important part of the game is the vote on the 2018 Budget: On October 20, 2017, the U.S. Senate passed the 2018 Budget with 51 votes to 49 votes, clearing the major obstacle for the Republican tax reform. This version of the resolution allows the tax reform to add a deficit of $ 1.5 trillion over the next 10 years, and only requires a simple majority (51 votes) to pass. On October 26, the U.S. House of Representatives approved a budget resolution for tax reform to pave the way for Trump's tax reform.
At this point, according to Republican November 2 tax reform bill, the tax reform plan will result in a deficit of 1.51 trillion US dollars in the next 10 years. However, there are still many viewpoints that this tax reform bill will cause a deficit of more than 1.51 trillion dollars in the next 10 years. For example, the U.S. Congressional Budget Office (CBO): House Republicans tax reform bill will cause the federal budget deficit to increase by 1.7 trillion US dollars in the next 10 years.
Argument two: tax reform is "economic poverty" or "economic prosperity"?
The tax reform outline canceled the tax rate of 39.6% for the rich, and the tax reform framework for 39.6% tax rate of the attitude of the reservation is not yet decided. Based on the principle that taxes on the rich can not be reduced, the tax rate of 39.6% for the rich is finally preserved in the Republican tax reform bill on November 2.
Mr Trump, the speaker of the House Republican, said Trump's biggest winner in tax reform will be the middle class, saying that a typical family of four ($ 59,000 in revenue) would reduce taxes by $ 1,182 (from $ 1,582 to $ 400 ).
However, according to the calculation of TPC, the most beneficiary of tax reform is the income group with a top 1% income ranking. In addition, the motion also expanded the exemption from property tax compliance with the estate assets doubled, and plans to abolish the estate tax six years later. According to the report of the Federal Reserve, the top 1% of households accounted for 39% of the total revenue in 2016, up from 30% in 1989. At present, the gap between the rich and the poor in the United States has reached its historic peak. According to the TPC It is estimated that tax reform seems to further widen the gap between rich and poor.
Debate three: Housing mortgage loan deduction policy led to the opposition of interested parties
November 6 tax reform bill (revised version) shows that the tax reform plan to maintain the current mortgage of 500,000 US dollars of housinginterest rateDeduction policy unchanged, while the current mortgageinterest rateDeductible policy is the deduction of interest expenses can reach 100 million.
This change in policy will have a big impact on the real estate industry, chief Moody's economist Mark Zandi said in the high-priced areas of the United States, the tax reform will initially allow prices to fall 10%, down 3% -5% in the United States. On the day of the release of the bill, the share price of homebuilder hit the biggest drop in one year.
In fact, on October 29, the National Association of Home Builders (NAHB) vowed to frustrate the proposal because of dissatisfaction with the terms of the mortgage deduction, and the National Association of Realtors opposed the tax reform from the outset motion.
Debate 4: 401 (k) Savings Plan
After the April 27 announcement of tax reform, Trump said the tax reform plan will not affect the 401K savings plan. After the tax reform program was announced on September 27, Trump once again said that "the tax reform plan will not adjust the 401K deposit credit limit, which is a good tax relief method widely used by the middle class."
But on October 26, in contradiction with Trump, Congress said it is still possible to adjust the retirement savings plan 401 (k) in the tax reform. Earlier, the media reported that Republicans considered the 401 (k) annual payment limit lowered from 18,000 US dollars to a minimum of 2,400 US dollars. In the process, Republican leaders have been trying to ease the opposition they may face in adjusting personal pension savings and state and local tax payments.
Note: The United States is a special retirement savings plan, it is popular because you can enjoy the tax benefits.
Contrast with historical tax reform
Before Trump tax reform, the main focus on "tax cuts" are "Reagan tax reform" and "Bush tax reform";
The Obama tax reform in 2010-2014, in addition to the tax cuts, also has measures to "increase tax" for the rich and is the product of stimulating the economy and saving the dual purpose of "fiscal deficit", the largest in history.
Through a simple comparison, in addition to the "Obama era", tax reform will indeed play a significant boost to the economy, corresponding to a marked decline in fiscal surplus, but it does, as "Love curve" said, as time goes by, The fiscal surplus will rise again.
Senate and House plans to reconcile the results.