Trump Administration Releases Initial Tax Reform Proposal
By: Daren Shaver
The Trump administration released its initial tax reform proposal on April 26 in the form of a one-page outline accompanied by a briefing from Treasury Secretary Steven Mnuchin and National Economic Council Director Gary Cohn.
According to Cohn, the Trump administration’s plan represents the "most significant tax reform legislation since 1986, and one of the biggest tax cuts in American history."
The one-page summary is excerpted below. While light on detail, the proposal nonetheless reflects considerable changes to the existing federal income tax system.
The 15 percent "business tax rate" would apply to corporations as well as small and medium-sized businesses taxed as pass-through entities (e.g., limited liability companies, partnerships, and S corporations). To the extent such pass-through income would have otherwise been taxed at personal income tax rates, this change would lead to significant tax savings (as well as tax-planning opportunities) unless other provisions are put in place to avoid abuse. Mnuchin did indicate that the plan will ultimately "make sure that there are rules in place so that wealthy people can't create pass-throughs and use that as a mechanism to avoid paying the tax rate they should be paying on the personal side." While the Trump administration appears cognizant of the issue, the drafting and subsequent enforcement of such anti-abuse rules represent a significant and difficult undertaking.
Significant reforms have also been proposed on the individual side, including changes to the brackets and a doubling of the standard deduction. While many deductions would be taken away (including the deduction for state and local taxes paid), the mortgage interest deduction and charitable giving deduction are expected to remain. The estate tax and alternative minimum tax are slated for repeal.
The Trump administration's plan is in its early stages and has been met with mixed reactions. CMPR will continue to monitor developments and provide updates as appropriate. Please contact Daren Shaver at Carle, Mackie, Power & Ross LLP (tel: 707-526-4200; e-mail: email@example.com) with any questions or for more information.
Trump Administration Tax Reform Proposal (released April 26, 2017):
2017 Tax Reform for Economic Growth and American Jobs
The Biggest Individual And Business Tax Cut In American History
Goals For Tax Reform
- Grow the economy and create millions of jobs
- Simplify our burdensome tax code
- Provide tax relief to American families — especially middle-income families
- Lower the business tax rate from one of the highest in the world to one of the lowest
- Tax relief for American families, especially middle-income families:
- Reducing the 7 tax brackets to 3 tax brackets of 10%, 25% and 35%
- Doubling the standard deduction
- Providing tax relief for families with child and dependent care expenses
- Simplify our burdensome tax code
- Eliminate targeted tax breaks that mainly benefit the wealthiest taxpayers
- Protect the home ownership and charitable gift tax deductions
- Repeal the Alternative Minimum Tax
- Repeal the death tax
- Repeal the 3.8% Obamacare tax that hits small businesses and investment income
- 15% business tax rate
- Territorial tax system to level the playing field for American companies
- One-time tax on trillions of dollars held overseas
- Eliminate tax breaks for special interests
- Throughout the month of May, the Trump Administration will hold listening sessions with stakeholders to receive their input and will continue working with the House and Senate to develop the details of a plan that provides massive tax relief, creates jobs, and makes America more competitive — and can pass both chambers.