President Trump touted his administration’s new tax proposal in Indiana Wednesday, saying the yet-to-be-fleshed-out framework will bring relief to low and middle-income families and businesses.
But the president, as he rolled out the White House goal to simplify the tax code and bring businesses back to the U.S., also made some comments that could benefit from further scrutiny. The plan, generally applauded so far by Republicans and scorned by Democrats, leaves many of the details to the tax-writing committees in Congress. Based on the framework the White House has released, this is how the president’s comments stack up.
Statement 1: “Our framework includes our explicit commitment that tax reform will protect low-income and middle-income households, not the wealthy and well-connected. They can call me all they want. It’s not going to help.”
Mr. Trump made a few claims in that statement, so let’s unpack it.
The plan is unlikely to do much to help low-income individuals and families. The framework does increase the standard deduction from more than $6,000 to $12,000, meaning that basically, anything a single person makes up to $12,000 is all his or hers. The standard deduction for married couples filing jointly will increase from more than $12,000 to $24,000, meaning anything a married couple earns up to that amount is basically tax free. But the president’s proposal also raises the lowest tax rate, currently at 10 percent, to 12 percent. It’s unclear who will be paying that rate, since the White House didn’t give any income levels. But it’s fair to say that those people won’t be making very much. Mr. Trump does want to increase the child tax credit, up from its current level of $1,000. The president’s plan does not mention the Earned Income Tax Credit, or EITC, which applies to lower-income filers with children.
For middle-class families and individuals, even White House officials earlier this week in a conference call with reporters were unable to promise it will not add to their tax burden, and they certainly weren’t able to promise it will significantly reduce their taxes. The plan could very well mean some middle-class families pay slightly less, while some pay slightly more. The impact of the tax changes also depends not just on income, but on geography. The president’s plan eliminates a deduction for state and local income taxes, meaning those in higher-tax states like California and New York will pay significantly more in taxes to the federal…