ThePresident Donald Trump touted at its official unveiling Wednesday has, like all changes in the tax code, winners and losers. It tilts toward corporations and wealthier Americans, but it offers something for less well-heeled taxpayers, as well.
If you own a business partnership, lucky you. If you live in a high-tax state like New York, sorry.
Because the nine-page framework document for the plan, crafted by the White House and GOP congressional leaders, is thus far scant on detail and revenue projections, analyzing it is hardly an exact science. In an appearance in Indianapolis to launch the plan, Mr. Trump said it was “focused on the middle-class, not high-income earners.” Other assessments, from the more liberal side of the spectrum, see it the other way around.
That’s a debate that will play out in coming months. The framework is intentionally bare-bones, with the details left to Capitol Hill. The last time a massive revamping of the tax code occurred, when Ronald Reagan was president in 1986, then-Treasury Secretary James Baker said the initial proposal was ‘written on a word processor,” and open to big changes.
Another dimension of the current debate will be cost. Goldman Sachs (GS) has put the tab at $4 trillion over 10 years.
Of course, getting any of this through Congress is a difficult task, especially by year-end as GOP leaders want.
“Health care involves around one-sixth of the U.S. economy, while taxes cover pretty much everything,” noted Mark Hamrick, senior economic analyst at Bankrate.com, pointing to the failure Republicans had trying to repeal and replace Obamacare. “That makes the broader fight even larger and more complicated.”
The stock market liked what it saw, especially financial stocks and those for smaller companies, which rose smartly on Wednesday, pointed out Ryan Detrick, senior market strategist with LPL Financial.
Given what we now know, here are some of the potential winners and losers:
An increase in the standard deduction. Winners: lower-income taxpayers. This feature of the tax code is for people who don’t itemize, which means those of modest incomes. The Republican plan nearly doubles it to $24,000 for married taxpayers filing jointly and $12,000 for single filers.
Also aiding these taxpayers is lifting the income ceiling for the $1,000 child-care credit, which they get to subtract from their tax bills, rather than deduct it from their income, which doesn’t bring as much of a benefit. The $1,000…