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Tax Policy and the Trump Administration

The Trump Administration has yet to begin the process of attempting to gain Congress’ approval of their desired tax policies. The administration has, however, released the general overview and objectives of their tax policies. Donald Trump's stated goals are to provide tax relief for the middle class, simplify the tax code, and grow the American economy without adding to the deficit.

Through a thorough analysis of the policy overview, the proposed policy can be considered in relation to academic research regarding both the catalysts and inhibitors of social inequality to logically predict the effects the policy will have on social inequality and social mobility in modern day America.

Overview of Trump’s Proposed Tax Policy

Donald Trump has proposed a very detailed tax plan. Donald Trump’s proposed tax policy would significantly reduce marginal tax rates on both individuals and businesses, increase standard deduction amounts by nearly four times the current levels, and reduce tax expenditures. In terms of the specifics of Donald Trump’s proposal, both Donald Trump and Republican leaders in the House of Representatives have voiced their plan to integrate America’s current seven tax brackets of 10%, 15%, 25%, 28%, 33%, 35%, and 39.6%, to three tax brackets:12%, 25%, and 33%. Trump also proposes repealing the head-of-household tax-filing category. The standard deduction would be $30,000 for married couples filing jointly and $15,000 for single individuals.

Trump’s Proposed Tax Policy and Social Mobility

In relation to social mobility, Trump's proposal does not explicitly hurt those in the bottom class. It does, however, provide the upper class with more savings than the bottom class. For example, under Trump’s plan, America’s top earners would benefit from tax cuts more than America’s lowest earners. Marginal income tax rates on wages and salaries would be reduced by about 2%. In translation to savings, this means the top 0.1% of earners would see a cut of over 7%, while those with the lowest incomes would see less than a 1% cut.

Donald Trump proposes to repeal the head-of-household filing status, along with personal exemption. Because of this, taxes would be boosted for many families, and some of the largest increases would apply to single-parent families. A married couple with $50,000 in earnings, two children, and no child care costs would face a tax increase of around $150. Meanwhile, a single parent with $75,000 in earnings, two children, and no child care costs would face a tax increase of around $2,440.

This disparity in the rate of increased taxes between families with married couples and families with single parents would damaging effects on the lower class in terms of social mobility. This is because there is a higher concentration of single-parent families in the lower and working class than in the upper class. Today in America, 90% of single-parent families are headed by females. Single mothers with dependent children have the highest rate of poverty across all demographic groups. About 60% of children in the United States that live with their mother only are impoverished, while only 11% of two-parent families are impoverished. The rate of poverty increases even more drastically in African-American single-parent families, as in this case, two out of every three children are poor. Thus single-parent families would suffer even more financial stress than married couple families from their initial state of increased poverty, which makes achieving upward social mobility an even more difficult task than before.

Donald Trump’s tax proposal would directly lead to an even greater concentration of wealth in the United States through its elimination of the federal estate tax. Today, only the wealthiest taxpayers (which surmounts to less than 1% of American taxpayers) pay that tax. Ultimately, one of the most crucial factors regarding how Donald Trump’s tax policy would affect ease of social upward mobility among the social classes is how the policy would affect the job market. One of the most direct ways for those in the low-income bracket or those who are unemployed or underemployed, to attain social mobility and improve their financial standing is through employment in steady jobs with benefits. How Donald Trump’s policy would affect the job market depends on how his policy would affect the economy, and as of today, economists cannot reach a decisive conclusion on whether or not the tax policy would be good for the economy. Some research points to the government losing $6.2 trillion in revenue over the first decade, while other research outlines the likelihood of an economic boom.