Opinion

OPINION: How President Trump Can Cut Taxes For The Middle Class

Getty Images

Ross Marchand Director of Policy, Taxpayers Protection Alliance
Font Size:

Using a variety of methods, presidents have long reveled in the ability to goad lawmakers into taking action.

President Reagan, for instance, urged that citizens call recalcitrant lawmakers to support his historic tax reforms. But few have proven as bold as President Trump, who suggested this week that lawmakers are cooking up a 10-percent tax cut for the middle class shortly before midterm elections.

Never mind that Congress will have no time to meet, let alone draft up an entire new tax policy proposal before facing reelection.

Assuming the President’s real promise to voters is for action after the midterms (if the Republicans win), how realistic is further relief for working American families? While money is almost always better spent in the hands of families than bureaucrats, tax cuts need to remain broad-based in order to have staying power.

Washington must also get serious about cutting spending and reduce deficits, which merely send a message to taxpayers that the government will eventually raise rates again.

Given the successes of the Tax Cuts and Jobs Act (TCJA), it’s entirely understandable that President Trump would want to double down in pro-growth tax policy.

After slashing individual rates across the board, reducing the corporate rate to 21 percent from 35 percent, and relieving America’s small businesses from paying the top marginal individual rate, businesses promptly announced new investments complete with new job openings and higher wages.

As of October 23, Americans for Tax Reform has collected more than 730 examples of tax reform “good news,” including “pay raises, bonuses, 401(k) match increases, expansions, benefit increases, and utility rate reductions.”

Most recently, for example, baked goods manufacturer Baker Boy is “purchasing new equipment, expanding business operations, and hiring new employees” thanks to the tax cuts.

But would the President’s proposed cuts fuel even further growth across America? The answer is a big “it depends.”

Currently, married couples filing jointly in the “middle class” tax bracket (earning from $19,050-$77,400) pay a 12 percent marginal tax rate on income, down from 15 percent thanks to the TCJA. A 10-percent reduction would mean a new rate of 10.8 percent, amounting to a roughly $500 tax cut for the median-earning American household.

Just under 20 million households earn $45,000 to $65,000, implying that President Trump’s tax cut proposal would amount to approximately $10 billion in annual savings for America’s middle-class households. While this is a rough estimate subject to multiple caveats, whatever the final figure, the amount of relief pales in comparison to the TCJA’s $100 billion-plus yearly relief.

When cuts are targeted narrowly to a sliver of the tax base, problems begin to emerge. Already, the marginal tax rate jumps for married couples at the $77,400 mark from 12 percent to 22 percent.

Reducing middle-income taxes from 12 percent to 10.2 percent would make for an even wider jump, distorting the job market and discouraging efforts to work harder and take on more hours and clients.

In the modern service economy, professionals and contract workers, such as ridesharing drivers and freelance writers can readily vary their workload in response to changing rates.

Workers may already be on the fence about driving that extra mile, and a sharp tax drop-off may keep that driver from going out. The same decisions vex stay-at-home parents, who are regularly on the fence about reentering the labor force after years of staying home.

Tax cuts, then, should be broad-based, with any reductions happening across all brackets instead of one. But while all tax relief is welcome, overspending must be kept under control to keep the relief permanent for workers.

This year, U.S. federal debt topped $21 trillion, more than $165,000 for every American household.

Passing historic tax relief while refusing to cut spending and running a $779 billion dollar budget deficit effectively tells taxpayers that the days of relief are numbered and limits economy-wide growth.

President Trump can avoid this problem and unleash our economy’s true potential by pushing for broad-based relief with offsetting cuts in spending.

Ross Marchand is the director of policy for the Taxpayers Protection Alliance.


The views and opinions expressed in this commentary are those of the author and do not reflect the official position of The Daily Caller.

PREMIUM ARTICLE: Subscribe To Keep Reading

Sign up

By subscribing you agree to our Terms of Use

You're signed up!

Sign up

By subscribing you agree to our Terms of Use

You're signed up!
Sign up

By subscribing you agree to our Terms of Use

You're signed up!

Sign up

By subscribing you agree to our Terms of Use

You're signed up!
Sign up

By subscribing you agree to our Terms of Use

You're signed up!

Sign Up

By subscribing you agree to our Terms of Use

You're signed up!
Sign up

By subscribing you agree to our Terms of Use

You're signed up!
Sign up

By subscribing you agree to our Terms of Use

You're signed up!
BENEFITS READERS PASS PATRIOTS FOUNDERS
Daily and Breaking Newsletters
Daily Caller Shows
Ad Free Experience
Exclusive Articles
Custom Newsletters
Editor Daily Rundown
Behind The Scenes Coverage
Award Winning Documentaries
Patriot War Room
Patriot Live Chat
Exclusive Events
Gold Membership Card
Tucker Mug

What does Founders Club include?

Tucker Mug and Membership Card
Founders

Readers,

Instead of sucking up to the political and corporate powers that dominate America, The Daily Caller is fighting for you — our readers. We humbly ask you to consider joining us in this fight.

Now that millions of readers are rejecting the increasingly biased and even corrupt corporate media and joining us daily, there are powerful forces lined up to stop us: the old guard of the news media hopes to marginalize us; the big corporate ad agencies want to deprive us of revenue and put us out of business; senators threaten to have our reporters arrested for asking simple questions; the big tech platforms want to limit our ability to communicate with you; and the political party establishments feel threatened by our independence.

We don't complain -- we can't stand complainers -- but we do call it how we see it. We have a fight on our hands, and it's intense. We need your help to smash through the big tech, big media and big government blockade.

We're the insurgent outsiders for a reason: our deep-dive investigations hold the powerful to account. Our original videos undermine their narratives on a daily basis. Even our insistence on having fun infuriates them -- because we won’t bend the knee to political correctness.

One reason we stand apart is because we are not afraid to say we love America. We love her with every fiber of our being, and we think she's worth saving from today’s craziness.

Help us save her.

A second reason we stand out is the sheer number of honest responsible reporters we have helped train. We have trained so many solid reporters that they now hold prominent positions at publications across the political spectrum. Hear a rare reasonable voice at a place like CNN? There’s a good chance they were trained at Daily Caller. Same goes for the numerous Daily Caller alumni dominating the news coverage at outlets such as Fox News, Newsmax, Daily Wire and many others.

Simply put, America needs solid reporters fighting to tell the truth or we will never have honest elections or a fair system. We are working tirelessly to make that happen and we are making a difference.

Since 2010, The Daily Caller has grown immensely. We're in the halls of Congress. We're in the Oval Office. And we're in up to 20 million homes every single month. That's 20 million Americans like you who are impossible to ignore.

We can overcome the forces lined up against all of us. This is an important mission but we can’t do it unless you — the everyday Americans forgotten by the establishment — have our back.

Please consider becoming a Daily Caller Patriot today, and help us keep doing work that holds politicians, corporations and other leaders accountable. Help us thumb our noses at political correctness. Help us train a new generation of news reporters who will actually tell the truth. And help us remind Americans everywhere that there are millions of us who remain clear-eyed about our country's greatness.

In return for membership, Daily Caller Patriots will be able to read The Daily Caller without any of the ads that we have long used to support our mission. We know the ads drive you crazy. They drive us crazy too. But we need revenue to keep the fight going. If you join us, we will cut out the ads for you and put every Lincoln-headed cent we earn into amplifying our voice, training even more solid reporters, and giving you the ad-free experience and lightning fast website you deserve.

Patriots will also be eligible for Patriots Only content, newsletters, chats and live events with our reporters and editors. It's simple: welcome us into your lives, and we'll welcome you into ours.

We can save America together.

Become a Daily Caller Patriot today.

Signature

Neil Patel