A cut for the “wealthiest” Americans in President Donald Trump’s new tax plan could be the linchpin of the Democrats’ plans to undermine it — but it could be a huge jump-start for one particular sector of American business.
According to Axios, the biggest cut in the president’s new tax plan — set to be unveiled later this week in Indiana — would be for owners of “pass-through” businesses, which would see their top rate fall from 39.5 percent to 25 percent.
As Axios notes, most businesses in America are sole proprietorships and small businesses which see all of the profits “passed through” to the owner and then taxed under the personal income tax rate instead of the corporate tax rate. One of the issues with this has been that small business owners, many of whom are far from wealthy, end up paying the same tax rate as the wealthiest Americans.
However, 45 out of 48 Democrats in the Senate have vowed in a letter to fight any tax plan that included lower taxes on those in the top tier — including small business owners. While Trump’s plan would also cut the top income tax rate from 39.5 percent to 35 percent, the size of the “pass through” cut could make it a convenient area of attack.
Therein lies the problem, though: small business taxes are one area where Americans don’t feel particularly comfortable taxing the pants off of the rich, if just because most of them understand the basic mechanism by which lower taxes on these “pass-through” businesses creates jobs.
Back in June, White House economic adviser Gary Cohn admitted that dealing with such “pass-through businesses” was one of the “toughest challenges” they faced via tax reform.
“The personal side is relatively easy and the corporate side is relatively easy,” Cohn said, while noting that “there’s a big group in the middle, pass-through entities, which is really tough, but that group is really important.”
Liberals are likely going to have a conniption over this one, but that’s hardly anything new. The important point is that the White House is easing the burden on small businesses and sole proprietors, which is clearly a win for the economy. If the Democrats decide to panic and make the “pass-through” tax rate one of the loci of their inevitable attack on the president’s tax reform package, they do so at their own peril. For once, Americans will quickly realize while soaking the “rich” will only end with everyone else sopping wet, too.
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H/T The Daily Caller