What Many Politicians Get Wrong In Their Tax Plans

Sep 29, 2015
Originally published on September 29, 2015 6:09 pm
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ARI SHAPIRO, HOST:

Of course, Donald Trump rolled out his tax plan yesterday, and like many candidates over many election cycles past, Trump wants to simplify the tax code by eliminating some tax brackets. NPR's Danielle Kurtzleben joins us to discuss why even though it's a popular idea, this might not be the best way to go about simplifying things. Welcome to the program.

DANIELLE KURTZLEBEN, BYLINE: Thank you.

SHAPIRO: Start by just explaining what we mean when we say eliminating tax brackets.

KURTZLEBEN: Sure. So let's say that the IRS says, hypothetically, that if you earn between 50,000 and $75,000, you're going to owe 15 percent on what you earn and that if you earn between 75 and 100,000, you're going to owe 20 percent. Those are two different tax brackets. What a lot of these plans are saying is, for example, let's put those into one. Let's say if you earn between 50- and a hundred-K, you're going to only owe 15 percent.

SHAPIRO: And, as you say, a lot of these plans are proposing to do that. It is not just Donald Trump. It's not even just Republicans.

KURTZLEBEN: You're right. In the past, you've heard president Obama advocate for fewer brackets, and this cycle, the specific plans that republicans have come out with thus far do advocate for fewer brackets as well. For example, Donald Trump yesterday proposed four brackets, down from the seven that we have now. Jeb Bush's has proposed three brackets. Marco Rubio has proposed two brackets. Ben Carson has proposed one bracket.

SHAPIRO: But when I have filled out my tax forms, what makes it complicated is not whether I'm in one tax bracket or another. What makes it complicated are the rules that say, if I have a long-haired sheep, I should fill out this form, and if I own a short-haired sheep, I should fill out that form, not that I actually own sheep, but...

(LAUGHTER)

KURTZLEBEN: No. That is exactly it - right. The complicated part does not come at the end when you're looking for the bracket that you belong in and the amount that you should pay. The complicated part is in the middle. It's the deductions you owe. It's when you have self-employment income. It's the credit. It's all of that. Not all of those are bad, but that is where a lot of the complication comes.

SHAPIRO: If that's the case, then why do political candidates keep saying, let's eliminate tax brackets in order to simplify the tax code?

KURTZLEBEN: That's a great question. I mean, one explanation is that it's easy to understand. It's easy to pitch as a simplification. It's easy to put under that simplification umbrellas. But also, you rarely hear someone reduce the number of brackets and raise taxes. It is often a lowering of taxes that comes along with reducing the number of brackets. So this is often a way that that sort of idea is packaged.

SHAPIRO: When you look at various candidates' plans, whether it's Donald Trump or others, below the eliminate-tax-brackets headline, are they actually doing things to simplify the nitty-gritty of the tax code?

KURTZLEBEN: Some are, yes, absolutely. And often, these reduction in the numbers of brackets come alongside a reduction in the - the word they often use is loopholes. So for example, Jeb Bush wants to eliminate the deduction for state and local taxes. And yes, that would simplify the tax code, for sure. And there are other ways that you can - that a lot of the candidates are trying to limit the number of deductions a person can take. So yes, there are some legitimate ideas out there to try to simplify the tax code. It's just that the bracket reduction is not necessarily one of them.

SHAPIRO: That's NPR's Danielle Kurtzleben who covers data and politics for us at npr.org. Thanks for the clarification.

KURTZLEBEN: Absolutely. Transcript provided by NPR, Copyright NPR.