Update: On April 26th, President Trump unveiled the latest version of his tax reform plan. While it was a little short on concrete details, a few items stand out. Trump is keeping with his campaign promise to cut corporate tax from 35% to 15%, and small business owners would, in turn, be taxed at the same corporate rate. Additionally, while the new individual tax brackets will indeed be cut down to three from seven, the rates have been slightly changed, settling on 35%, 25%, and 10%. However, no details of the income amounts of these new bracket rates have been announced.
Trump is also attempting to bring in money from overseas by reinstating a one-time repatriation tax, although no rates have been announced right now. On top of also eliminating the estate tax like he planned, Trump has also eliminated itemized deductions aside from charitable giving and mortgage payments, claiming that this will keep richer Americans from filing large deductions. However, this move could also greatly affect freelancers and small business owners. The new plan also eliminated the current 3.8% tax rate on net investment income, which is a move that will also benefit higher-earning Americans.
All new presidents bring with them a tidal wave of big ideas that — along with the pressures of the ticking First 100 Day countdown clock — cause an impatient push to shake things up. Foremost among these priorities is almost always some kind of juicy tax plan that must move from the vagueness of the campaign trail to the cold and clear realities of governing. A lengthy and frustrating process that we’re going to attempt to walk you through by going over the known specifics of President-elect Donald Trump’s and how it will impact you and your wallet.
The Heart Of The Matter
According to the tax policy page on Donald Trump’s website, he wants to “reduce taxes across-the-board, especially for working and middle-income Americans who will receive a massive tax reduction” and to “ensure the rich will pay their fair share, but no one will pay so much that it destroys jobs or undermines our ability to compete.” As with many of Trump’s proposals, the packaging speaks to a great ambition, but does everything add up when you look at the details?
From the Tax Policy Center’s detailed analysis:
“The plan would cut taxes at every income level, but high-income taxpayers would receive the biggest cuts, both in dollar terms and as a percentage of income. Overall, the plan would cut the average tax bill in 2017 by $2,940, increasing after-tax income by 4.1 percent. However, the highest-income taxpayers (0.1 percent of the population, or those with incomes over $3.7 million in 2016 dollars) would experience an average tax cut of nearly $1.1 million, over 14 percent of after-tax income. Households in the middle fifth of the income distribution would receive an average tax cut of $1,010, or 1.8 percent of after-tax income, while the poorest fifth of households would see their taxes go down an average of $110, or 0.8 percent of their after-tax income.”
To make these cuts, the Trump tax plan aims to simplify things by cutting the amount of personal income tax brackets from seven down to just three.