Trump Tax Plan Would Increase Deficit By Over $10 Trillion
For perspective, according to this site projected federal revenue for fiscal year 2015 is $3.2 trillion. So on a lazy math basis, we could call it a third. You know the old joke about a billion here a billion there, pretty soon you are talking about real money. Doesn’t work that way with a trillion. A trillion is real money all by its lonesome.
Trump’s Plan Inverts Traditional Tax Planning Makes Carried Interest Moot
Trump’s scheme would seem to make it so everyone will want to be an independent contractor and that ordinary business income will be the most favored type of income. Whatever he thinks, the transition to this system will not be simple. Right now the IRS fights with S corporations that pay meagre or no salaries to avoid employment taxes. Now we will add a 10% income tax spread to the mix. What the policy rationale is for taxing an independent contractor at 60% of the maximum rate for an employee is a mystery to me.
The other question to ask is who will want to defer business income with a 401(k) or the like, since the payout might be taxed at a higher rate than the deduction yields in savings.
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Over and over again courts have said that there is nothing sinister in so arranging one’s affairs as to keep taxes as low as possible. Everybody does so, rich or poor; and all do right, for nobody owes any public duty to pay more than the law demands: taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant.