If the GOP’s tax reform plan follows the outline President Trump gave in Indianapolis [Trump in salesman mode in Indiana as he pushes tax-cut plan, IBJ.com, Sept. 27], it might contain the administration’s first genuine victory for the middle class. The biggest middle-class win in Trump’s tax plan will be eliminating itemized deductions and taxing pass-through businesses like partnerships and S-corporations. It closes some of the tax code’s biggest loopholes.
Itemized deductions create discrimination among taxpayers and complicates the system. The 9 billion hours taxpayers annually spend sorting through the complicated rules offsets their benefits and makes the system harder to audit. Likewise, taxing pass-through businesses will increase revenue simply by treating all forms of business organizations equally.
But equity and transparency aren’t as popular as you would expect. Many businesses benefit disproportionately from these deductions, whether by finagling practices to fit the deductions’ rules or by creating an entire business around these rules’ incomprehensibility.
These loopholes won’t close without a fight from the few who benefit from them. But, if our congressmen will rise to the challenge, closing them frees up more revenue for tax cuts that benefit everyone.