All Financial Wisdom
Why 400 Super Millionaires in the US Don’t Want Lower Taxes
More than 400 millionaires have sent letters to Congresses urging the republican congressmen and legislators not to carry out a tax reduction. This may sound odd on the surface.
These millionaires are comprised of senior executives, business owners, entrepreneurs, doctors, lawyers and a number of people with great fortunes who say that reducing taxes will increase the inequality of citizens in the country.
The debt of the United States is at the highest levels and with great social inequality reaching the worst levels since the 20s.
We ask ourselves: Who will pay for all the tax cuts?
The letter tries to influence the decision of tax cuts by the Republicans
The letter has been signed by personalities such as George Soros, Steven Rockefeller, Ben Cohen, Jerry Greenfield, Eileen Fisher and many others who are part of the richest 5 percent in the United States. This gesture has been made as Republicans debate the details of the law announced by Donal Trump in April 2017.
On the other hand, the Republicans of Congress do not believe that a reform has been created to lower taxes on the wealthy of the United States. The US tax system is made to incentivize investment, according to the head of the White House Economic Council, Gary Cohn.
Donald Trump raises a plan that will make a large tax cut for US citizens, and the wealthy want to intervene in the debate that enters its final stretch. The Senate and the House of Representatives have put on the table the tax reform proposals that they hope to approve in December.
With the mid-December deadline, many see these weeks as the last opportunity to influence what the Republicans approve.
Republicans seek a tax reform to increase investment
Quite the opposite of what Republicans want most of the time when the tax cuts go up, they do not translate into consumption or investment within households. Therefore, these millionaires (and billionaires) affirm that within their letter a proposal of the organization of “Responsible Wealth.”
The concept “Responsible Wealth” establishes that the companies of the United States have registered profits at record levels and that the millionaires do not need more money than they already have. On the other hand, they say they are willing to be taxed, if the money is invested in areas such as education, research or infrastructure for the country.
They also want to ensure the permanence of public health programs aimed at the most economically disadvantaged. Republicans say they can not afford to spend money, but in turn, they can allow wealthy people to have a reduction in their taxes. Wealthy people say that this does not make any sense to them.
Inheritance tax in the United States
Although the tax reform initiatives of the US Senate and the House have some differences, both want to reduce the tax burden on a large number of the wealthy.
The wealthy who criticize the reform refer to the proposal to eliminate the ‘estate tax’ or inheritance tax, which is only paid on assets worth more than US $5.49 million, which have been received by the heirs of a fortune.
It is estimated that around 5,000 families pay this tax at present. Clearly one of the most controversial points has been the inheritance tax. By cutting this tax, we will lose around 2.69,000 billion dollars in 10 years.
This $269 billion represent more than the combined budget of the Food and Drug Administration, the Centers for Disease Control and Prevention, and the Environmental Protection Agency.
Who will pay for all the tax cuts in the United States?
In September, Trump presented his tax reform as the largest fiscal cut in the history of the United States. The plan is still a mystery, given that it has been proposed to reduce taxes on large fortunes and lower the tax burden of businesses and, at the same time, improve the living conditions of the American middle class and people with lower income
The big question that arises is who is going to pay all for these tax cuts in the United States.
Trump’s reform proposes the reduction of the corporate tax rate from 35 to 20 percent, a cap reduction for higher incomes from 39.6 to 35 percent, and double the exempt minimum, which is currently at $12,000 US dollars per year in the case of a couple in which both are working.
It also includes measures to repatriate capital and a simplification of the fiscal sections, which will go from seven to three (12 percent, 25 percent and 35 percent).
The Trump government makes a strong tax reduction to generate enough economic growth to offset the effect on the public coffers of the United States in the medium term. But Democrats warn that the reform bill will end up paying for social programs.
The study of ‘think-tank Tax Foundation’ has made the calculation that the implementation of this reform may cost the public coffers of the United States about 5 billion US dollars in 10 years. This represents a big hole against Republicans’ attempts to reduce the public deficit by 3.2 percent of GDP, and public debt of more than 82 percent of GDP.
Why 400 super millionaires in the US do not want taxes to go down
These billionaires believe that Trump’s plan is absurd. They say that, according to the Republicans, we can not afford to spend more public money, but we can reduce taxes on the richest. This does not make sense to us and to American citizens either.
The millionaires emphasize that the Republican tax plan would disproportionately benefit the richest, while adding at least $ 1.5 trillion in tax cuts to the deficit over the next decade. This will directly affect the reduction of social programs.
They believe that it is neither fair nor wise to provide a tax reduction to the rich at the expense of working families, especially if this is financed by dismantling programs that cover basic needs such as health and nutrition.