- Edward McCaffery: Trump boasts his tax plan would double the standard deduction, but it would hurt many Americans
- Among those hit the hardest would be single parents, large families and those working in blue states, he writes
Edward J. McCaffery is Robert C. Packard trustee chair in law and a professor of law, economics and political science at the University of Southern California. He is the author of "Fair Not Flat: How to Make the Tax System Better and Simpler." The opinions expressed in this commentary are his own.
(CNN)Fresh from yet another failure to repeal-and-not-quite-replace Obamacare, President Trump and fellow Republicans are attempting to pull another trick out of their traditional playbook: "massive" tax cuts, mainly helping the rich.
- Single-parent households. While loudly trumpeting the doubling of the standard deduction, the Trump plan would not be kind to single parents. It would eliminate the rate structure for single-parent households, which now splits the difference between married taxpayers and singles without children. Millions would suffer.
- Larger families. Back to that standard deduction trick. Trump's plan would roughly double the "standard deduction" given to taxpayers who do not itemize their deductions, from roughly $6000 to $12,000 for single persons, twice as much for married couples. But the plan would also eliminate personal exemptions, presently roughly $4,000 per person, including children. So there is a net gain of $2,000 for single persons. Married couples without children gain $4,000 on net ($12,000 in rise in standard deduction, but $8,000 in losses from removing their exemptions.) Having a single child makes the change neutral (gain $12,000, lose $12,000), and having more than one child makes your family a loser. Some of this effect will be affected by the raise in the lower bracket from 10% to 12% and the as-yet unspecified increase in the child credit, but larger families will still lose out in this math.
- Blue state earners. The repeal of the state and local tax deduction will mainly hurt upper middle income earners in states with high income taxes -- which means California, New York and Illinois. One can check various color-coded electoral maps available in the White House to see for whom these states voted in 2016.
- The future. Even with all the details being nowhere close to in place, the Trump plan would be a "massive" increase in the debt and deficit. Trump is now talking about the cuts spurring a 6% growth rate, more than double what we have now -- levels we haven't seen in over three decades. As is, interest payments on the federal debt take up over 6% of our budget, more than twice as much as the federal government spends on education and more than what we spend on housing and community, energy and the environment, international affairs, and science -- combined. With interest rates rising and more debt being added, that figure will rise, choking off the possibilities for government spending and making a tax increase -- likely a sneaky tax increase on the working class -- inevitable. Of course, that fiscal pain is pushed down the road -- perhaps to when a Democrat is in the White House again.