Pres. Trump has proposed a new federal income tax plan.
While this plan has been positively spun by the administration there are cracks in the plan that need to be fixed or at least understood by the American people.
The first matter addresses the new tax brackets which have been reduced to only three from seven. These new brackets are 12%, 25% and 35%. The first gap between 12% and 25% is too broad. A new tax bracket of 18% should be added increasing the number brackets to four from three.
A number of deductions are being eliminated which could have a negative impact on property values, rental property, the elderly, and the income taxes of citizens living in states with income taxes and high state and local taxes such as California and New York.
The elderly will be negatively impacted by the loss of medical deductions which in fact escalate with age. The complete elimination of this deduction is highly undesirable for the elderly and full medical cost deductions really should be provided to anyone 70 and above.
The loss of cost deductions for owners of income property for repairs and maintenance will lead to the depletion and decay of rental properties, and is a negative incentive that will have the ultimate effect of reducing rental properties conditions and lead to safety concerns for these properties. As a matter of fact the elimination of deductions for state and local taxes, as well as the elimination of deductions for operating costs on rental properties will have the overall effect of reducing property values because of the decreased cash flows of owning them.