The U.S. tax code is complicated. That is one point we can all agree on. President Trump and Republicans want it simplified with a flat tax, but that means losing some, if not all, entitlements, deductions and tax credits. For some, it’s worth it for the time and effort it would save tax payers and the government.
The Cost of a Flat Tax
With President Trump and a Republican congress, we’re likely to hear the 10% or flat tax proposal again. In theory, this would simplify the tax code and a flat tax might mean closing loopholes the wealthy use to get out of paying their fair share. The trade-off is having fewer, if any, deductions, entitlements and incentives. It would mean reducing or ending incentive programs like Social Security and general tax credits thousands of individuals qualify for.
Many of us qualify for tax credits that can be applied to offset the cost of college and even the cost of Social Security. Tax credits are also used as a tax incentive to encourage businesses and consumers to promote and purchase certain types of products. These programs would likely be reduced if not ended entirely if a flat tax or similar system were to be implemented, but will this happen?
Tax Reform in Motion
President Trump is set on keeping his word. In the few short weeks he’s been president he’s managed to cause quite an uproar. Given Trump’s background and current political party, we can probably expect to see Trump set his sights on capital gains and inheritance tax at the very least. He will likely aim for the 10% flat tax Republican ideal, but that can’t be done overnight.
Permanent change will come through a coordinated effort from the new administration and congress. Right now, “securing the country” seems to be Trump’s main focus. Whether or not he will get around to tax reform before the midterm elections remains to be seen, but we can expect to have the boat rocked.
A simplified tax code would be nice for all of us. There isn’t need for dramatic change, but dramatic is Trump’s style. There are several hypothetical pros and cons to a sweeping tax reform. We won’t know the outcome until it happens and it seems that if the current administrations stays the course, we’ll be seeing taxation changes in one way or another.