Tax Strategies

Trump Tax Cuts

The so-called, “Trump Tax Cuts” from 2017 are in the news as Democrats argue that they benefited only the richest Americans.

This recent chart from the Tax Foundation shows that in the 4 years following the 2017 tax law change, the wealthiest households paid a greater share of Federal taxes. Their share went from below 40% to over 45% – about an 600bps increase.

This tax law change is set to expire soon and Democrats claim that letting it sunset will benefit poor & working class families. I don’t think anyone would look at this chart and expect that to be the case – but everyone can make their own choices.

Related: Changing Tax Deductions

Image: TaxFoundation.org

8 thoughts on “Trump Tax Cuts”

  1. Trump tax codes doubling the standard deduction helped people at the lower end of earnings.

    As an exercise to understand the effects of the Trump tax cuts on my household, I filled out my taxes under the current Trump code and then reworked the numbers according to the old tax code. We hear Cuck Schumer making a lot of noise about capping the deductibility of state and local taxes under Trump’s tax code. They were also capped under the Obumbler tax code because state and local taxes were a trigger for AMT kicking in. There was also similar noise about George Bush’s tax cuts coming from the Demonrats, and once again the cuts ended up triggering AMT because I was paying too little according to it’s formula.

    The Alternative Minimum Tax was designed in the late 1960s to get 200 wealthy slick operators who were zeroing out their taxes, to get them pay their fair share. AMT thresholds have never been adjusted for inflation, so the middle class are now getting tangled in its web. Social Security became taxable for the first time in 1984 at thresholds for Singles at $25,000 and Marrieds at $32,000 total taxable income. These have never been adjusted for inflation. The thresholds represented a decent income back in 1984. Now, they hitting the Middle Class.

    The punchline is tax plans sold as making ‘The Rich’ pay their fair share have a way of catching the middle class due to not adjust thresholds and phase-outs to offset the true rate of inflation. I have spreadsheets that I use to model each year’s taxes at the beginning of the year. I use the result numbers to budget my estimated quarterly payments and overall budget for the upcoming year.

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    1. Good explanation. The SALT deduction hurt me – living in high tax MN – but it was the right thing to do. The high-tax blue states want nothing more than to get that deduction back.

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      1. The SALT Deduction was a wash for me, because of AMT.

        Here is another way of looking at whether the uncapped SALT Deduction is fair or not. I am attaching a link to a Smart Asset Study that shows in 2023 which states paid more in Federal Taxes than they received back in Federal spending. Minnesota was at the top of the list as paying $5 in Federal Taxes for every $1 received back. You will not that some of the states complaining about high State and Local Tax States getting an unfair tax break are actually receiving more in Federal Spending than they pay in taxes.

        https://smartasset.com/data-studies/states-most-dependent-federal-government-2023

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  2. The US and many states’ tax policies are designed to buy the votes of 51% of the electorate and have the other 49% pay for everything.

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  3. Maybe I’m the odd one out, but I think they should let the cuts sunset then not increase federal spending much. I don’t understand how cutting taxes is fiscally responsible as it has the same effect as increased spending. Both are not overly responsible. I feel like not many people share my opinion.

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    1. I understand that thinking. Many think tax cuts just increase the debt – which absent spending cuts, they do. That said, freezing current spending assumes that it is all worthwhile spending. In my opinion, much of it is not worthwhile. If it needs to be paid for, I’d prefer it to be across everyone – through inflation – than added to individual income tax.

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  4. I think George Jr did the same thing, refused to let a temporary tax expire. I don’t think you should be taxed at all if you make under 150-200K a year.

    Carol

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