No. of Recommendations: 5
One of the challenges is that the discussion about tariffs on an apolitical basis has been tainted by partisan politics. One party wants the status quo and the other is trying something very different. That doesn't mean that tariffs are going to boost our economy enough to succeed and they have done tremendous damage to the global economy in the past, but they continue to be posed in ways that raise the blood level of everyone.
The following is not meant to support either position, but rather look at the new contours of the country's economy
Boiled down, those driving the current bus driver absolutely hate income taxes (to the point that they have eviscerated the enforcement arm of the IRS - no cops means no crime).
The "Big Beautiful Bill" is obviously written with the protection of the assets and income of the wealthy from onerous taxes, but there are quite a few benefits to the "middle class". I found it interesting that many of them phase out and disappear for higher than that income tranche (I consider myself "lucky" enough to lose out on all of them, and since I no longer own a Subchapter S business of significant size, the only effect of these is on the estate side).
From Perplexity:
Key Tax Benefits for the Middle Class
The standard deduction, nearly doubled under the 2017 tax law, is made permanent and further increased. For 2025, the deduction is $15,750 for singles, $23,625 for heads of household, and $31,500 for married filing jointly, with most middle-class households using the standard deduction.
Personal exemptions remain eliminated, but this is offset for most by larger standard deductions and credits, especially for families.
Federal tax cuts are significant: for example, families earning between $15,000 and $30,000 see an average 21% cut; $30,000 to $40,000 get roughly 9.5%; and $40,000 to $50,000 see a 7.2% cut. Taxpayers earning under $50,000 on average receive a 14.9% cut. 66% of the total tax relief is directed at families making less than $500,000 annually.
The Child Tax Credit expansion from the 2017 tax law is locked in: families with children get a higher and more accessible credit, while the threat of losing half the value of this credit is averted.
"No Tax on Tips" and "No Tax on Overtime": Tipped and hourly workers benefit from the elimination of income taxes on tips (up to $25,000) and overtime premiums (up to $12,500) through at least 2028, with phase-outs for higher-earning households.
Car loan interest: Up to $10,000 of interest on car loans may be deductible through 2028 for middle earners, with phaseouts as income rises.
Social Security for seniors: An above-the-line deduction of $6,000 per senior age 65+ is allowed, reflecting the campaign pledge of no taxes on Social Security for most retirees, with phaseouts for upper-middle incomes.
Estate and gift tax exemptions are permanently raised, but the most direct impact for the middle class is the prevention of an across-the-board tax hike (which would have happened without the act) and the preservation of tax rates, lower brackets, and benefits that were at risk of expiring.
Additional Considerations
The bill locks in all seven tax rates and brackets from the TCJA, indexed for inflation, and makes them permanent for middle earners, avoiding a possible tax hike after 2025.
Expanded child care credits and paid leave credits remain available, helping families offset major expenses.
For small business owners and some pass-through entities, the 20% qualified business income deduction (QBI, Section 199A) is made permanent, with increased income thresholds for phaseout. This deduction can lower pass-through business owners’ taxable income substantially.
The cumulative effect is a predicted average tax cut per household of about $3,700, with the largest proportional gains for lower and middle-income workers and families.
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Another strategy is the physical expulsion of the portion of those employed (or not) who are in the country illegally to increase job opportunities for unemployed Americans and cut the cost of government-supplied social services.
The tariffs are designed for two purposes:
1) The application of what amounts to a consumer-paid sales tax to raise revenue to replace the lower income tax revenue
2) The tariffs are promoted as means to get (extort) foreign companies to build plants in the US to create more jobs for Americans
Another effort is to save money by the cutting of services by the Federal government. If those services are deemed important, it is now up to the states (or local government) to raise their own funds to replace them - presumably causing consternation amongst local politicians who will now have to run for reelection on a "raise taxes" platform.
Whether the above shift will address our deficit will be interesting, but all changes are frightening - and some deserve that fear.
This post is not intended to spur debate of whether the above is an optimal solution or gross stupidity, but whether it is an appropriate description of what is taking place.
Jeff
No. of Recommendations: 1
So basically the progressive income tax is being replaced with a regressive VAT masquerading as a series of tariffs.
Turning back the clock, to 1912, when there were high tariffs, and no income tax. iirc, enacting the income tax was part of a package, linked with reductions in tariffs, as the tariffs were seen as unfairly born by lower income people.
Steve
