Now that last-ditch efforts to repeal Obamacare are finished, President Trump and Republicans are readying a new policy initiative that revolves around one of the president’s key campaign promises: tax reform.
President Trump announced the new tax proposal at an event in Indiana Wednesday afternoon, and overall, the plan looks to reduce the number of individual tax brackets, lower corporate tax rates, and eliminate many personal deductions.
“We’re going to cut taxes for the middle class, make the tax code simpler and more fair for everyday Americans, and we are going to bring back the jobs and wealth that have left our country, and most people thought left our country for good,” said President Donald Trump. “We want tax reform that is pro-growth, pro-jobs, pro-worker, pro-family, and yes, tax reform that is pro-America.”
It was negotiated by the “Big Six,” which includes House Speaker Paul Ryan, Senate Majority Leader Mitch McConnell, Treasury Secretary Steve Mnuchin, the National Economic Council’s Gary Cohn, Ways and Means Chairman Kevin Brady, and Head of the Senate Finance Committee Orrin Hatch.
Senior administration officials told reporters on Tuesday that the goal of the new plan is to “be at least as progressive” as what’s currently in place.
Under the Trump administration’s tax reform plan, the number of individual tax brackets will decrease from seven to three. The lowest bracket will increase from 10% to 12%, the middle bracket will be 25%, and the highest tax bracket will fall from 39.6% to 35%. However, it is unclear at this time who will pay those rates, as the administration has delegated income limit decisions to the House and Senate tax-writing committees.
There may also be a fourth bracket, higher than the 35% rate, for the country’s wealthiest individuals and families.
Additionally, the proposal doubles the standard deduction that most Americans take ($12,000 for a single person and $24,000 for a married couple). It also eliminates the alternative minimum tax and increases the child tax credit, though the details will similarly be up to the committees. The plan cuts many itemized deductions, but keeps those for mortgage interest and charitable giving, as well as incentives for retirement, work, and higher education.
Trump also mentioned that the plan will add a $500 tax credit for “non-minor dependents,” like elderly parents or grandparents who live with family. And, the president said that the new tax proposal will repeal the “crushing” estate tax, which is also known as the inheritance or death tax; this is a tax imposed on property transferred from a deceased person to their heirs.
A key pillar of the blueprint was the goal to “restore America’s competitive edge,” and taxes on businesses are set to see major changes. Small businesses’ new top tax rate will be 25%, while corporations’ tax rate would fall to 20%; corporations currently have a tax rate of 35%.
The Trump administration is also proposing a move away from the current worldwide tax system to a territorial system, allowing companies to send their offshore profits back to the U.S. without incurring extra taxes.
Despite touting the plan as a “middle class miracle,” and it may be, it is unclear at this point who would benefit from the Trump administration’s tax reform proposal: the rich, the poor, or the in-betweeners. There are still many questions left unanswered, a factor that seemingly comes standard with policy proposals these days.
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Trump's Tax Plan Blueprint, Explained
Now that last-ditch efforts to repeal Obamacare are finished, President Trump and Republicans are readying a new policy initiative that revolves around one of the president’s key campaign promises: tax reform.
President Trump announced the new tax proposal at an event in Indiana Wednesday afternoon, and overall, the plan looks to reduce the number of individual tax brackets, lower corporate tax rates, and eliminate many personal deductions.
“We’re going to cut taxes for the middle class, make the tax code simpler and more fair for everyday Americans, and we are going to bring back the jobs and wealth that have left our country, and most people thought left our country for good,” said President Donald Trump. “We want tax reform that is pro-growth, pro-jobs, pro-worker, pro-family, and yes, tax reform that is pro-America.”
It was negotiated by the “Big Six,” which includes House Speaker Paul Ryan, Senate Majority Leader Mitch McConnell, Treasury Secretary Steve Mnuchin, the National Economic Council’s Gary Cohn, Ways and Means Chairman Kevin Brady, and Head of the Senate Finance Committee Orrin Hatch.
Senior administration officials told reporters on Tuesday that the goal of the new plan is to “be at least as progressive” as what’s currently in place.
Under the Trump administration’s tax reform plan, the number of individual tax brackets will decrease from seven to three. The lowest bracket will increase from 10% to 12%, the middle bracket will be 25%, and the highest tax bracket will fall from 39.6% to 35%. However, it is unclear at this time who will pay those rates, as the administration has delegated income limit decisions to the House and Senate tax-writing committees.
There may also be a fourth bracket, higher than the 35% rate, for the country’s wealthiest individuals and families.
Additionally, the proposal doubles the standard deduction that most Americans take ($12,000 for a single person and $24,000 for a married couple). It also eliminates the alternative minimum tax and increases the child tax credit, though the details will similarly be up to the committees. The plan cuts many itemized deductions, but keeps those for mortgage interest and charitable giving, as well as incentives for retirement, work, and higher education.
Trump also mentioned that the plan will add a $500 tax credit for “non-minor dependents,” like elderly parents or grandparents who live with family. And, the president said that the new tax proposal will repeal the “crushing” estate tax, which is also known as the inheritance or death tax; this is a tax imposed on property transferred from a deceased person to their heirs.
A key pillar of the blueprint was the goal to “restore America’s competitive edge,” and taxes on businesses are set to see major changes. Small businesses’ new top tax rate will be 25%, while corporations’ tax rate would fall to 20%; corporations currently have a tax rate of 35%.
The Trump administration is also proposing a move away from the current worldwide tax system to a territorial system, allowing companies to send their offshore profits back to the U.S. without incurring extra taxes.
Despite touting the plan as a “middle class miracle,” and it may be, it is unclear at this point who would benefit from the Trump administration’s tax reform proposal: the rich, the poor, or the in-betweeners. There are still many questions left unanswered, a factor that seemingly comes standard with policy proposals these days.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020. Click here for the 6 trades >>