Rumors of the death of world markets in the event of a Donald Trump election apparently were greatly exaggerated. The Dow Jones Industrial Average has stormed higher. Global equities have been right behind. American CEOs and CNN reports, “are thrilled with Trump.”
For all those who own stocks and who are CEOs, that’s swell. But how about everyone else? How about the roughly 50 percent of Americans who own no stocks? Or the vast majority whose incomes put them in the middle to lower ranges of the economic spectrum? What will a Trump presidency do for their pocketbooks?
Obviously, the economy is a difficult thing to predict, and I won’t try. But I can analyze tax proposals. After all, preparing tax returns — especially for those with incomes of less than $100,000 — is what our company does.
When I look at President-elect Trump’s tax proposals, I do see meaningful benefits up and down the income spectrum:
The result is that federal income tax burdens are going to fall across the board. According to the independent, Washington, D.C.-based Tax Policy Center, they’ll fall 1 percent in the lowest quintile moving incrementally up to 9.7 percent in the top quintile.
Clearly, the net tax benefits rise as income levels rise, a feature that some observers have criticized. Skeptics also ask how the country will pay for all these cuts.
Defenders of the plan note that the top 20 percent of taxpayers already pay about 85 percent of the nation’s individual taxes. They also say the country can indeed pay for all these cuts, if the cuts – and some others in mind for business — stimulate the economy and job growth as they predict.
I’m not here to referee such debates. My point is simply this: Americans across the income spectrum do stand to benefit from these proposed tax changes. And if the economy does indeed move into a higher gear, the result will be job and wage growth that will benefit hardworking Americans.
President-elect Trump also said he wants to simplify tax returns. Some might view that as a risky development for a tax preparation company, but I applaud it. Taxes are complicated. And not only because of the 74,000 pages of related rules.
They’re complicated because life is complicated. Life changes create new opportunities for credits and deductions each year. From getting married and having a baby to moving for a job or even turning 50, new and different credits and deductions could become available.
Because of those personal nuances, there will always be a need for individuals to get expert help to file their taxes. Simplification won’t change that. And all of the social benefits disbursed through the Treasury Department are lost if you don’t know to claim them, or don’t file a tax return.
As an example, last year one in five taxpayers eligible for the earned income tax credit, one of the largest credits available, didn’t receive this benefit because they either didn’t claim it or they didn’t file an income tax return. Millions of taxpayers leave millions of dollars on the table without even knowing.
President-elect Trump’s proposals enhance benefits up and down the board, including safety net benefits for lower income taxpayers. But the cost of not knowing you are eligible, and, therefore, not claiming them, is about to grow.
David Prokupek is the CEO of Jackson Hewitt Tax Service Inc., an innovator in the tax industry with a mission of offering its hard-working clients access to simple, low-cost solutions to manage their taxes and tax refunds.