The Battle Over the Trump Tax Reform Continues to Heat Up
BlackRock Inc Chief Executive Larry Fink said that the U.S. tax reform proposed by the White House will be unable to pass Congress as it is currently structured, saying that the plan would add to the deficit.
Fink went on to say in an interview with Bloomberg Television that he believed the plan would need to be amended if it’s going to pass. Fink also said that as the population of the U.S. ages, the cost of social-insurance programs would rise and the deficit would increase even further due to the loss of revenue from the White House tax plan.
President Donald Trump’s tax reform plan is one of his signature campaign promises. It has, like many others of the president’s proposals, faced stringent opposition from the media and members on the left. Even some Republicans have voiced criticism of the plan when it was revealed that some members of the middle-class, who live in states with high taxes, will actually receive a tax increase.
The tax increase on some middle-class households is the result of the White House trying to pay for the tax reductions across the board. The Trump tax outline shows a $5.99-trillion reduction in taxes with a federal revenue reduction of $2.4-trillion over the next 10 years, according to the non-profit Tax Policy Center.
In order to pay for this loss of the revenue, the federal government would have to make large cuts but has yet to implement anything of that sort.
One of the ways that the Trump administration is looking to reduce the revenue hit is by cutting a reduction scheme that allows residents in high-tax states to pay less towards federal income. By killing or lessening that reduction, some households will experience a tax increase in places like New Jersey and California. It has been pointed out that the states most affected by the federal income tax reduction are Democrat-controlled, leading to speculation that there is a partisan angle to the tax reform.
Another wrinkle in the Trump tax reform plan is that it primarily benefits the wealthy and super-rich, while those in the lower-income brackets will not experience much of a cut at all.
While the bottom 90% of households in the U.S. by income will receive a one-percent cut on average to their taxes, the top one percent will receive 8.5% in cuts. The top 0.1% will benefit even further, with a 10.2% reduction in their taxes, according to the Tax Policy Center.
This marks another one of Trump’s signature legislations that is finding itself bogged down with the potential to fail in Congress. The multiple repeals of the Affordable Care Act (also known as Obamacare) have similarly floundered in the Senate and House.
“This Is What a Real Middle-Class Tax Cut Would Look Like,” The Atlantic, October 3, 2017.
“BlackRock CEO says U.S. tax reform plan will have to be amended,” Reuters, October 3, 2017.