There was a lot of talk about tax reform during the presidential campaign. Now that the Trump administration is well into the second half of its first year, it's a good idea to review what changes may come.
The administration has not revealed a concrete plan regarding tax reform proposals. While any changes require the backing of an often contentious Republican congress, there are some common goals between the two.
True to their GOP roots, congressional Republicans want to eliminate taxes wherever possible while simultaneously lowering the tax rate for corporations. They also champion the elimination of tax breaks to raise revenue.
The president has stated he wants to see the corporate tax rate drop to 15 percent from the present 35 percent. Republicans in the House are realistically eyeing a rate of 20 percent.
Depending on who is asked, there are conflicting views about who benefits more, workers or corporate shareholders when the corporate tax rates are slashed. According to the Congressional Budget Office, just a quarter of the corporate income taxes affects workers. Even then, those affected are administrators like Chief Executive Officers and other high-salaried employees.
If the president succeeds in reducing corporate tax rates, revenue would decrease by about $2.3 trillion.
The Trump administration has also listed three separate tax brackets for individuals — 10 percent, 25 percent and 35 percent, which nearly dovetails with the GOP proposals of 12, 25 and 33 percents.
With the passage of Trump's version, revenues can be expected to dip by $2 trillion.
How these scenarios will eventually play out is anybody's guess. If you have concerns about these proposals and want to stay abreast, your tax law attorney is a good source of advice.
Source: Washington Examiner, "What's in Trump's and Republicans' tax reform plan," Joseph Lawler, July 27, 2017