2017 Tax Reform: President Trump’s Latest Proposal
Earlier this week, U.S. National Economic Director Gary Cohn and Treasury Secretary Steven Mnuchin released goals and key features of President Trump’s tax reform plan. The plan touched on a few proposals he made while campaigning; however, Director Cohn and Secretary Mnuchin emphasized throughout the briefing that many details were still to be negotiated. The plan features are as follows:
- The Individual tax rates would be reduced from seven to three (10%, 25%, and 35%). The breakdown of brackets has not yet been determined.
- The standard deduction would double, with the intention that fewer taxpayers would itemize.
- The Alternative Minimum Tax (AMT) would be repealed.
- The Net Investment Income Tax (NIIT) of 3.8% would be repealed.
- The estate tax would be repealed.
- Many itemized deductions would be repealed. Mortgage interest was specifically mentioned as being retained.
- Provisions for tax relief for families with child and dependent care costs were mentioned but no details were given.
- The business tax rate would decrease from 35% to 15% for corporations.
- The top tax rate for pass-through entities would be reduced from 39.6% to 15%.
- Offshore earnings would be taxed as a one-time repatriation. The percentage of the tax has not yet been determined. During the campaign a 10% tax was mentioned for offshore earnings.
- The worldwide system of taxation (under which a U.S. taxpayer is generally taxed on its worldwide income regardless of where earned) would change to a territorial system (under which income would generally be taxed in the country where it is earned).
In addition to these key features, it might also be noted that the plan did not specifically mention a border adjustment tax, which has been viewed as a way to offset revenue losses that will result from the tax cuts. As far as the time frame, Secretary Mnuchin said the administration is determined to have changes made by year-end.