Donald Trump’s tax plans a ‘massive giveaway’ to richest 1%

Donald Trump’s taxation plans would represent a “massive giveaway” to America’s richest one per cent and leave eight million of its poorest families worse off, experts have warned.

The proposal - which Mr Trump announced would benefit the “forgotten” working and middle classes - will reportedly see millions of low-income and single-parent families face sharp tax hikes, while America’s elite receives a break worth an estimated $214,000 (£171,000).

In a move likely to exacerbate the already entrenched US wealth gap, America’s millionaire and billionaire classes, who turned out in droves to support the Republican candidate’s election bid, are set to benefit from the reform that could encourage a “new era of dynastic wealth”.

“Trump’s current tax plan would be a massive giveaway to the top one per cent and lead to big tax cuts for Trump’s own companies,” International economics expert Thomas Sampson of London School of Economics (LSE) told The Independent.

“Paying for Trump’s plan would require drastic cuts to Government expenditure. These cuts would probably target programmes that support less well-off Americans.”

According to the Tax Policy Center, while the proposal would cut taxes on households at every income level, the top would benefit most in terms of share of income.

The centre's analysis into Mr Trump's tax plans also raised fears for the economy: "The fundamental concern the plan poses is that, barring extraordinarily large cuts in government spending or future tax increases, it would yield persistently large, and likely unsustainable, budget deficits."

Prior to November’s historic election result, which saw Mr Trump’s campaign rally to an unexpected victory, at least half of his supporters agreed with the idea of taxing the rich more heavily, according to a survey by the RAND Corporation research group.

"Just before the election, after the last debate, 51 per cent of them intending to vote for Trump supported increasing taxes on high-earning individuals," RAND sociologist Michael Pollard told NPR.

Mr Trump's new plan appears to do the opposite.

Lily Batchelder, who wrote an academic paper on the implications of Trump’s tax plan, said the real estate mogul’s initiative would significantly raise taxes for at least 8.5 million families, representing 26 million individuals.

“The Trump tax plan is heavily, heavily, skewed to the most wealthy, who will receive huge savings,” Lily Batchelder, a law professor and tax expert at New York University, told the Guardian.

“At the same time, millions of low-income families, particularly single-parent households, will face an increase.”

Her research found that even taken at their “most conservative”, Mr Trump’s tax plans would leave 61 per cent of households worse off if the proposed changes go ahead.

Single-parent families could be set to bear the brunt of the hardship as the plans would lower the minimum tax-free earnings to $15,000 (£12,000) per adult, regardless how many children live in the household.

The current taxation system allows single-parent families with one child $17,400 (£14,000) and $24,750 (£20,000) for a couple with one child. The threshold increases by $4,050 (£3,300) for each additional child.

The plans would also see the current seven tax brackets split into three: 12 per cent, 25 per cent and 33 per cent, scrapping the current 10 per cent tax for earnings under $19,625 (£15,700) and replacing it with 12 per cent.

Despite Mr Trump’s introduction of much-lauded childcare credits, experts claim this won’t make up for the increased tax on earnings.

“His plan is not for the wealthy, but rather provides the biggest benefit to working and middle-class families. This plan is needed because child care expenses are one of the largest expenses in many families, complicating a family's decision on how to care for young children,” read a statement on Mr Trump’s campaign website.

However, Ms Batchelder said Mr Trump’s promises do not not translate into practice, as millions of families could face paying thousands extra.

She said minority families are set to suffer disproportionately from the tax increases, with 32% of African American families facing a tax increase compared with 19% of whites, due to African American families being more likely to share the burden of child-rearing within the family and therefore unable to benefit as much from childcare credits.

The plans come in stark contrast to Hillary Clinton’s proposals, who advocated, according to her campaign website, “making sure the wealthy, Wall Street and corporations pay their fair share in taxes.”

Ms Clinton planned to raise taxes, mainly on the super-rich, proposing a four per cent surtax on income over $5m (about £4m) and a higher capital gains tax while saying she would close tax loopholes.

"While much is uncertain about Trump’s tax plan, it focuses more on tax cuts for the wealthiest and for large corporations than Hillary Clinton would have done. US multinational companies have hundreds of billions of dollars stashed in offshore tax havens, a problem that has been debated in Washington, D.C., for some time," LSE International Political Economy Fellow Martin Hearson told The Independent.

"A relatively high tax rate of 35 per cent, combined with the distorting way in which US tax rules work, deters companies such as Apple and Google from repatriating the profits they make abroad. Trump’s economic plan is Washington blinking first: more than halving the US rate to 15 per cent, and allowing firms to repatriate their profits at a tax rate of just 10 per cent. With Theresa May committing on Monday to maintaining the lowest corporate tax rate in the G20, this means further cuts to the UK’s corporate tax rate are likely too."

Mr Trump also plans to scrap inheritance tax, which is currently only charged on estates worth more than $5.45m (£4.3m) and joint estates of $10.9m (£8.7m), affecting just one in 500 Americans.

“It’s hard to think of a tax change that will have a more detrimental effect on inequality,” Matt Gardner, a senior fellow at the Institute on Taxation and Economic Policy told the Guardian.

“There is no question that this will lead to a perpetual income elite – hardly the thing that Trump voters would have wanted. This will lead to a new era of dynastic wealth.”