On Wednesday, April 26, the White House issued President Donald Trump’s main goals and priorities for tax reform, including significant cuts of the corporate tax rates, moving to a territorial tax system and eliminating business tax breaks for special interests. The White House proposals were outlined in a one-page sheet of bullet points titled “2017 Tax Reform for Economic Growth and American Jobs.” The fact sheet states this is “The Biggest Individual and Business Tax Cut in American History.”
The Administration’s one-page sheet states that tax breaks that mainly benefit the wealthiest taxpayers would be eliminated, but the deductions for mortgage interest and charitable donations would be protected. For businesses, top tax rates can expect to be lowered, and tax breaks for special interests can expect to be eliminated. Secretary Mnuchin has said that most of the revenue cost associated with President Trump’s tax reform proposals would be offset by increased economic growth. See below for highlights.
How does the plan affect individuals?
Reducing the 7 tax brackets to 3 tax brackets to 10%, 25% and 35%
Doubling the standard deduction
Limit itemized deductions to mortgage interest and charitable contributions
Repeal the Alternative Minimum Tax
Eliminate the Estate Tax
Repeal the 3.8% Obamacare tax
How does the plan affect businesses?
Lowering the top tax rate to 15%
Impose a “one-time tax” on corporate earnings realized and held overseas and on which tax is deferred
Change from worldwide taxation to a territorial tax system; exclude from taxation of foreign-earned income
Eliminate tax breaks for special interests
The plan did not include a proposal similar to the border adjustment in the House Republican blueprint that was released in June 2016. Further, the Trump Administration provided no estimates for the cost of enacting the level of business and individual rate reductions outlined today.
We will continue to keep you informed of the developments. Please contact your GHJ tax advisor if you have any questions or wish to discuss the proposed changes in more details.