Melanie T. Collette
There’s a lot of talk around the water coolers about what President Donald Trump’s tax reform plan will mean for Americans.
In simple terms? An easier tax return… and probably some more cash in your pocket.
The Council of Economic Advisors (CEA) analysis of the Trump tax plan reports implementation could result in a pay raise of up to $9,000 per year for the average American household. That’s because wage growth in a healthy economy typically keeps pace with corporate profits.
CEA notes wage growth has stagnated over the past eight years, while corporate profits have grown 11%.
It all hinges on the tax cuts for corporations. The current Trump tax plan addressed corporate taxes in two ways: Slashing of the corporate tax rate from 35% to 20% and returning corporate earnings sitting off-shore back to American soil.
In other words, they’re encouraging billionaires who are hiding U.S. dollars overseas to bring it home and pay their fair share.
Approximately $2.8 trillion in corporate profits are sitting offshore to avoid the 35% rate were profits brought back to the states, according to Audit Analytics.
Bringing it back — called repatriation — would allow corporations to bring profits back to that money back to the US.
According to the CEA, a 20% corporate tax rate in 2016 would have resulted in additional $140 billion to be used for reinvestment, job creation and increased earnings for everyday Americans.
While liberal tax reform opponents like Senate Minority Leader Chuck Schumer says Trump tax cuts are an attack on the middle class, history does not bear that out according to the Bureau of Labor Statistics.
1963 tax cuts implemented by President John F. Kennedy resulted in the creation of 12 million new jobs over a five-year period.
Almost twenty years later, Regan tax cuts in 1981 created 14.8 million jobs over the same time frame.
Most recently, five years of George W. Bush tax cuts in 2003 garnered 7.8 million jobs.
In addition to corporate tax cuts, the Trump tax plan has additional benefits for individual tax-payers: doubling the standard deduction so first $12,000 of income for single and $24,000 for married couples; lower tax rates to 12 percent, 25 percent, and 35 percent; an increase in the Child Tax Credit; and a $500 tax credit for those caring for dependent adults.
All in all, Trump’s tax plan could flow trillions of dollars back to the U.S.
What does that mean for you, in simple terms? More jobs and more money.
Who could complain about that?
— Melanie T. Collette is a contributing writer for The Horn News and host of the “MoneyTalk with Melanie” show. She is an outspoken conservative with a passion for small government and finance.