Recently, Secretary of the Treasury, Steve Mnuchin and President Trump’s chief economic advisor and Director of the National Economic Council, Gary Cohn, outlined President Trump’s proposed corporate and individual tax reform plan. While many of the specific details have yet to be disclosed, here’s what we know:
• Reduce the individual tax brackets from seven to three – 10%, 25% and 35%
• Repeal the alternative minimum tax
• Restore the 20% capital gains tax rate and repeal the 3.8% net investment income tax
• Repeal the "death tax"
• Double the standard deduction
• Eliminate all tax deductions other than mortgage interest and charitable deductions
• Massive tax cuts, tax reform and simplification for businesses
• Lower business rate from 35% to 15%
• One-time tax on dollars held by corporations overseas and a competitive repatriation rate
• Ensure small and medium sized business will be eligible for 15% rate
• Get the US economy back to 3% GDP growth
President Trump’s plan, what his advisers are calling the "biggest tax cut" in U.S.history, has some distinct deviations for individual taxpayers from the plan he outlined as a candidate for President , including:
• Reduced lowest tax rate for individuals from 12% to 10%
• Top tax rate for individuals has increased from 33% to 35%
• Standard deduction has decreased from $30,000 to $24,000
Also, Secretary of the Treasury Mnuchin noted that there are still a lot of details to be ironed out before this proposal becomes a bill, including:
• Determining income ranges for individual tax brackets
• Clearly defining what businesses are eligible for the 15% tax rate
• Ensuring that wealthy individuals cannot bypass a higher individual tax rate by paying the lower corporate tax rate
• Whether the tax proposal will be revenue neutral (i.e., whether it would result in a larger U.S. deficit)
While President Trump’s tax reform proposal could turn out to be the biggest tax cut and reform since 1986, it is a long way from becoming a reality, especially considering the Tax Reform Act of 1986 took months to crawl through the legislative process.
Feel free to reach out to us if you would like to discuss in further detail.