Eliminating the personal deduction is a huge tax on the lower classes. Currently, the personal deduction phases out once you start getting around a quarter million in income per year, so rich people get no benefit out of it. It also severely discourages having kids compared to the present, although it looks like they may revamp the Child Tax Credit to help this slightly. Extending the Child Tax Credit to more wealthy people makes sense only from a eugenics perspective; currently, the tax system more strongly encourages poor people to have kids than rich people. Personally, and I know this likely sounds abhorrent at first, but I would support removing any child tax breaks from poor people unless they allow their children to be semi-adopted by an upper-middle class family, in which both get tax breaks. Habits that tend to cause poverty are spread to one’s children, and if we really want to improve the lives of poor children and put them on equal footing with others, we need to give their families an incentive for them to be groomed by those who have good life habits, not their parents. The semi-adopters would not become legal parents of the children, but there would be additional tax incentives tied to the tax income provided by the adoptee upon reaching adulthood that would encourage the semi-adoptive parents to seek the best for their quasi-children. But I’m sure most people think I just want to take poor children away from their parents without considering what I’m actually trying to accomplish, and no one will ever support it. At least I’m trying though.
I personally don’t understand the point of the tax on corporations’ income. As long as it gets taxes at regular income rates when it gets sent to the shareholders, I’m not sure why we should have another level of taxation and a whole portion of the tax code dedicated to the taxation of corporations. Simply stop it and eliminate the provision that qualified dividends are taxed at the same rates as long-term capital gains. There would probably still be a shortfall, but I would definitely accept a larger personal tax rate so as to eliminate completely the double taxation of corporations. As it stands, while it’s a bigger chunk of the federal budget than the estate tax, it’s still falls well below the personal income tax in share of total revenue, and I would like the tax system better if all those taxes were just rolled in there. Even more to the point, I would simply have all corporations taxed just like S-Corps, as pass-through entities, where the shareholders pay tax on income regardless of whether they receive distributions or not. You could then eliminate the distinction between a corporation and a non-corporation, taxing every multi-member entity as a partnership and every single-member entity as a disregarded entity. Doing so would allow you to eliminate huge swaths of the tax code. Of course, it would make the rather tricky partnership law a bit more important, but then at least there’d only be one system instead of two.
Doing that would also eliminate a partial loophole of becoming an S-Corp so as to not have to pay self-employment tax on all of your income as a small but not hugely successful business owner. Those who makes tons of money already miss most self-employment taxes on most of their income due to being over the Social Security wage limit, and the Obamacare Net Investment Tax now covers most of the gap for Medicare that was being missed, but there’s still plenty of folks out there who effectively steal money by saying some of their self-employment income is from their investment in their business simply because they have a corporate wrapper on it, while someone else with the exact same business without that wrapper pays more in taxes. The only question to me is at what point “investing” in Social Security is actually still a net benefit - there are two break points at which increased wages have a lesser effect on your retirement benefit than they did before the break point.
Ok, that’s more of a critique of the current tax system and has very little to do with the Republican plan, but, eh, it’s close enough to on topic, and it’s what I’ve got to say on the subject of tax reform.
