The latest on Trump’s proposed tax reform

Kathleen Hargrove on April 28, 2017

On April 26, 2017, Director of the National Economic Council Gary Cohn and Treasury Secretary Steven Mnuchin, on behalf of the Trump Administration, revealed “core principles” of the President’s tax reform plan. Many of the proposals were similar to those he made on the campaign trail, including a steep cut in the tax rate for businesses.

Director Cohn and Secretary Mnuchin emphasized throughout the briefing that many details were still being negotiated. The proposed changes would affect both business and individual taxpayers:

Business Taxpayers

  • The business tax rate would decrease from 35% to 15% for corporations and the top tax rate for pass-through businesses (e.g. partnerships, sole proprietorships, S- Corporations) would be reduced from 39.6% to 15%.
  • There would be a one-time repatriation tax on offshore earnings. The exact percentage of the tax rate is still being negotiated.
  • There would be a shift from a worldwide system of taxation(under which a U.S. taxpayer is generally taxed on its worldwide income regardless of where earned) to a territorial system (under which income would generally be taxed in the country where it is earned).

Individual Taxpayers

  • The current seven individual income tax rates would be reduced to three: 10%, 25%, and 35%. Tax brackets (i.e., income levels at which these rates would apply) have not yet been determined.
  • The standard deduction would be doubled, with the intended result that fewer taxpayers would itemize.
  • The alternative minimum tax (AMT) would be repealed.
  • The 3.8% net investment income tax (which was enacted as part of the Affordable Care Act, or Obamacare) would be repealed.
  • The estate tax would be repealed.
  • Most “tax breaks” would be repealed. Exceptions would be made for certain provisions involving home ownership, charitable giving, and retirement savings. In taking questions from the press, Secretary Mnuchin said specifically that the mortgage interest deduction would be retained.

The plan did not include any proposals for raising new revenue to offset that lost by the tax cuts. Secretary Mnuchin has stated that “the cuts will pay for themselves by generating more economic growth.”  He also stated that they were determined to “get this done this year.”

We hope this information has been helpful to you and we will continue to keep you updated as new details are released. If you have questions about how these proposed changes may affect you, please contact your Whalen & Company representative.

 

Source:

Thomson Reuters