Cuts to Benefit Programs Indispensable to Trump’s New Budget Plan

Trump Budget Tax Plan Cuts Spending Benefit

Trump’s Budget Plan

As we discussed in our feature article on Trump’s tax reform proposal, President Trump’s plan is to consolidate the existing tax bracket structure by reducing the number of brackets from seven down to three. This consolidation will positively impact very high earning Americans and negatively impact many middle earning Americans; those at the top will receive a cut, while many in the middle will be faced with a somewhat higher tax burden than they would have previously under the seven bracket structure.

As it turns out, the tax reform proposal is just one part of a larger plan to alter the entire existing financial landscape of our country. Trump’s aim is to tackle our massive national debt and restore our overall financial health; toward this end, he has developed a comprehensive budget plan which has proved highly controversial and is currently facing significant difficulties in the Congress. The question remains whether the budget plan can successfully pass through without being transformed into something unrecognizable in comparison to its original form.

Let’s look at some of the major provisions of the plan and then go over some of the controversy surrounding it.

Major Cuts to Benefit Program Spending

Certainly the most controversial aspect of Trump’s budget proposal is its management of funds dedicated to benefit programs. The new plan aims to slash approximately $200 billion of benefit program spending from the federal budget immediately; the plan also aims to slash funding for Medicare, Medicaid and the Obama health law. Overall, Trump’s plan will cut approximately $5.4 billion from the budget over the course of the coming decade. By 2027, the goal is to turn our current national annual deficit into a small surplus.

Cuts Provoke Philosophical Debate

Unsurprisingly, Trump’s budget plan has provoked strong opposition from Democrats. Progressive legislators haven’t been shy to claim that the budget plan’s large cuts are politically unworkable as well as socially undesirable given the effects they will have on broad segments of the population. Aside from political objections, the budget plan has also raised deeper philosophical issues among politicians both in Washington, D.C. and throughout the entire country. The plan brings up complex questions about the proper role of government in civic life: what responsibility does the federal government have to effectively “gift” resources to citizens? And, assuming the federal government does have such a responsibility, how much is each citizen entitled to receive?

We will have to watch and see whether Trump’s plan will be enacted without significant modifications. What is perhaps most fascinating, however, is the way that Trump’s budget is calling upon pundits and political leaders to reevaluate some of the most foundational questions of our political life. It’s probably safe to say that the Trump administration will leave a very lasting imprint on our civic life as it will compel us to look in the mirror and carefully examine the features which make us who we are.

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How Trump’s Tax Plan Will Affect Individuals

Trump Tax Plan Bracket System

Trump Tax Plan

The election of Donald Trump to our nation’s highest political office is undoubtedly one of the most surprising developments in U.S. history. This is a purely factual observation, completely removed from any sort of partisan bias. Many reliable polls taken just prior to the election showed Clinton with a firm advantage. And the fact that Mr. Trump is essentially a political outsider, having no prior political offices on his resume, seemed to cast serious doubt on the viability of his candidacy. Trump’s success has triggered a mass of heated reaction, both of a supportive and antagonistic nature. No matter how much the perception of his electoral success varies at the individual level, however, what is certain is that his victory will be regarded as one of the most unlikely in our nation’s history.

Trump’s staunchly pro-American standpoint captivated his followers and played a large role in building his base of voters. He repeatedly claimed that he would utilize the powers of the presidency to protect the American people – especially working and middle-class people – from internationalist economic policies and improve the American standard of living.

But how will these things be achieved? Trump has devised a tax plan which forms one part of his overall agenda for substantive change. But will his plan actually benefit the majority of American taxpayers? Let’s take a closer look at how the Trump tax plan will affect individual taxpayers.

New Tax Bracket System

Trump intends to reduce the total number of tax brackets from the current number of seven down to three. The three (ordinary) rates would be: twelve percent for individuals earning $37,500 or less; twenty-five percent for those earning between $37,500 and $112,500; and thirty-three percent for individuals earning above $112,500. Again, these thresholds apply to single filers, the income thresholds are doubled for married couples filing jointly.

This new bracket system may result in either a tax cut or a tax increase for middle income earners depending on which bracket they fell into the preceding year.

This system would give a substantial tax cut for high income earners as it would reduce the top rate of 39.6 percent down to thirty-three percent.

The full impact of the Trump tax bracket system is still impossible to determine because we currently are unaware of what sort of credits, limitations and qualifications the system will be coupled with. But at this point it appears that the new system will provide mixed results for middle income earners and generally positive results for very high income earners.

Increased Federal Deficit

Though Trump’s new tax bracket system may benefit quite a number of individual taxpayers, when combined with his corporate tax cuts this new system will add to the national deficit. If these cuts remain in place for the next ten years, projections show that federal revenue will decrease between $4.4 trillion and $5.9 trillion. Trump has stated that he plans to cut spending by approximately $1.2 trillion over the next decade; if these figures remain the same, they would result in an increase to the national deficit of around $5.3 trillion.

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The 3 Most Common Scams Aimed at Tax Professionals

Taxpayers are not the only ones who fall victim to scams by criminals during tax season. Professionals who prepare taxes can also be made victims of scams which target them for money. For this reason tax professionals need to be educated about the most common scams aimed toward them. Below is a list of the three most common scams targeted at tax professionals.NoScams

(1) Tax Preparer Phishing Scam

Phishing scams are scams in which the victim is goaded into providing sensitive personal and financial information through email. This information is then used by the perpetrator to rob the victim. One example of this method is an email asking tax professionals to update their IRS e-services portal information and their EFINS. The links provided in the email are designed to capture the tax preparer’s username and password, which can then be used by the criminal to steal sensitive information for financial gain.

(2) Identity Theft

Identity theft for tax purposes involves individuals using a stolen Social Security number to file a fraudulent tax return in order to receive a refund. Tax professionals should be aware of this scam and ask for all necessary documentation in order for a client to prove their identity when filing tax information for a refund.

(3) Hiding Offshore Income

Some taxpayers use offshore accounts to hide money from the IRS. A tax professional should be aware of all income earned by the individual they are working with in order to avoid any potential liability in helping the taxpayer prepare their taxes.

Don’t become a victim of tax fraud.

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Huddleston Tax CPAs of Seattle & Bellevue
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Huddleston Tax CPAs & accountants provide tax preparation, tax planning, business coaching, Quickbooks consulting, bookkeeping, payroll and business valuation services for small business. We serve Seattle, Bellevue, Redmond, Tacoma, Everett, Kent, Kirkland, Bothell, Lynnwood, Mill Creek, Shoreline, Kenmore, Lake Forest Park, Mountlake Terrace, Renton, Tukwila, Federal Way, Burien, Seatac, Mercer Island, West Seattle, Auburn, Snohomish and Mukilteo. We have a few meeting locations. Call to meet John Huddleston, J.D., LL.M., CPA, Tawni Berg, CPA, Jennifer Zhou, CPA, Jessica Chisholm, CPA or Chuck McClure, CPA. Member WSCPA.