The President and his team recently released a one-page document proposing major changes and deep cuts to the individual tax system. Released near the 100-day mark of his administration, the plan includes changes in rhetoric that betray some of what we’ve heard for the past months and during the campaign.
Notably, the repeal of deductions of state and local taxes paid, could have a negative effect of high-tax states such as California, New York, and New Jersey. The standard deduction would only be applicable to charitable donations and mortgage payments. Tax rates have been proposed to drop to 35% from almost 40% in the top bracket, with lower brackets being set at 25% and 10%. Corporate taxes would be lowered to 15% from 35% with US companies owing little to nothing on foreign profits. The 15% extended to corporations will extend to business income reported by individuals.
The one-sheet proposal was lacking details and has raised questions from economists, pundits, and Americans.
- Can companies immediately write off capital expenses?
- What happens to personal exemptions?
- What’s the deal with the one-time tax rate on US companies’ non-domestic earning?
- What is done with child care credits?
Tax reform has continually been put on the backburner by Congress and the divisions in Washington don’t seem to be healing anytime soon. If Democrats band together under Senate Minority Leader Chuck Schumer’s belief that the plan overly benefits the country’s top earners to the detriment of the middle and lower classes, Republicans will need to pass the plan through Reconciliation, which requires the bill to not increase budget deficits beyond a ten-year period. And while Republicans largely praise the plan, economists have doubt that it will be able to keep ballooning deficits in check.
Representative Kevin Brady (R-Texas) believes, “It really makes clear the president’s commitment on tax reform and delivering it in a very bold way this year.” Though as chairman of the House Ways and Means Committee, he claims, “We’ve still got some work to do. There’s no question about it.”
With a recent, heavy focus on ACA repeal, we haven’t seen much new come from the President’s tax and finance teams on the details presented (or missing from) the proposal. Treasury Secretary Steven Mnuchin and Gary Cohn, economic advisor to Mr. Trump claimed those details are being negotiated with Congress.
“We have a unique opportunity to do something major here,” said Mr. Cohn. “It’s our intention to create a huge tax cut and equally as important, a huge simplification of the tax system in America.”
We’ll be keeping a close eye on the developments from Washington. In the meantime, if you have tax questions or a tax debt you are unable to pay, our experienced tax settlement professionals are happy to discuss your tax resolution options free of charge. For more information about our services, visit us today at www.professionaltaxresolution.com or call us at 877.889.6527. Our CPAs, Enrolled Agents and other skilled accountants have a thorough understanding of tax law together with the experience necessary to know which tax settlement option will be the best fit for your specific set of circumstances.