No clear answers on tax structure

As Congress, whether controlled by Democrats or Republicans, considers tax reforms, it pays for individual wage earners to keep their hands on their wallets and their eyes on the news.

With his usual self-effacing modesty, President Donald Trump has announced we will get the “biggest tax cut in history.”

Everybody?

I don’t think so.

The Republicans want to cut the corporate tax rate, but the jury is out on the impact that will have on government revenues or on relief to other taxpayers.

Corporations stand to have their maximum tax rates reduced to 20 percent from 35 percent, but it’s debatable how much that matters. Currently, their U.S. tax bill averages about 13 percent of their profits. That’s because they pay foreign governments taxes on the income reported there and the U.S. allows them to deduct that from the profits they bring home.

Even after taxes, corporate profit margins remain healthy, and that’s due in part to the taxes paid at lower rates to foreign governments.

Maybe it’s time to repatriate those profits by exchanging lower rates for surcharges on taxes paid to foreign treasuries.

Meanwhile, the Republicans are considering a reduction in tax-free contributions allowed for 401(k) programs. That will make it harder for families to save adequately for retirement, especially since “defined-benefit” pensions, which used to guarantee retirement income, have gone by the wayside.

The 401(k) is our current best option, and my generation’s failure to save adequately for retirement even with 401(k)s, is a lesson on how well Americans in general prepare for the future.

With that in mind, I ask Republicans why they’re making it less attractive for families to save for retirement, especially in the face of Social Security’s pending bankruptcy in all too few years.

It won’t pay to be old in America.

Republican congressional representatives are also considering an end to tax deductions for state taxes already paid. This makes little sense, given that Republicans generally favor state and local control over federal control.

President Trump has said he’s tired of “subsidizing state governments.”

Huh?

It’s not subsidizing states, it’s subsidizing taxpayers. The states will get their money regardless. The individual taxpayer will only pay more to the feds.

Without drastic cuts in federal spending, including defense, our big tax break is going to result in greater debt. The national debt is already 77 percent of gross national product.

What that will mean is that even substantial cuts in federal spending will be offset by increased interest on national debt payments as the debt rises.

There is a great cry from the Democrats that the rich don’t pay their share of taxes. On an individual basis, rich people spend smaller percentages of their income on taxes, but the actual amount they contribute is disproportionately large.

I don’t have any answers, so like everyone else, I’ll keep monitoring news with one hand on my wallet and the other poised to act at the polls.

Steve Hansen writes about our life and times from his perspective of a retired Tucumcari journalist. Contact him at:

stevenmhansen

@plateautel.net