On Wednesday afternoon, U.S. National Economic Director Gary Cohn and Treasury
Secretary Steven Mnuchin, on behalf of the Trump Administration, revealed "core principles"
of the President’s tax reform plan. Many of the proposals were similar to those he made on
the campaign trail, including a cut in the tax rate for businesses to 15%.
Director Cohn and Secretary Mnuchin emphasized throughout the briefing that many details
were still to be negotiated. For an article summarizing the tax proposals made by President
Trump while campaigning—some of which provided a greater level of detail than the
overview today, although these details are obviously nowhere near firm.
For business taxpayers:
...The business tax rate would decrease from 35% to 15% for corporations, and the top tax
rate for pass-through businesses would be reduced from 39.6% to 15%.
...There would be a one-time repatriation tax on offshore earnings. The exact percentage of
the tax rate is still being negotiated.
RIA observation: Previous reports, as well as Trump’s proposal on the campaign
trail, had indicated a 10% tax was being considered.
...There would be a shift from a worldwide system of taxation (under which a U.S. taxpayer is
generally taxed on its worldwide income regardless of where earned) to a territorial system
(under which income would generally be taxed in the country where it is earned).
RIA observation: Noticeably absent from the plan was a border adjustment tax,
which several House Republicans favor as a way to offset revenue losses resulting
from tax cuts.
For individual taxpayers:
...The current seven individual income tax rates would be reduced to three: 10%, 25%, and
35%. Tax brackets (i.e., income levels at which these rates would apply) have not yet been
...The standard deduction would be doubled, with the intended result that fewer taxpayers
...The alternative minimum tax (AMT) would be repealed.
...There would be some sort of tax relief for child and dependent care expenses, although no
specifics were provided.
...The 3.8% net investment income tax (which was enacted as part of the Affordable Care
Act, or Obamacare) would be repealed.
...The estate tax would be repealed.
...Most "tax breaks" would be repealed. Exceptions would be made for certain provisions
involving home ownership, charitable giving, and retirement savings. In taking questions from
the press, Secretary Mnuchin said specifically that the mortgage interest deduction would be
retained, and that the deduction for state and local income taxes would be eliminated.
What about revenue neutrality? The plan did not include any proposals for raising new
revenue to offset that lost by the tax cuts, which, if enacted, could significantly increase the
federal deficit. Secretary Mnuchin has said the cuts will pay for themselves by generating
more economic growth but fiscal hawks, potentially some in Trump’s own Republican Party,
along with Democrats, are certain to question these claims.
Timeframe. Secretary Mnuchin, consistent with recent statements, said that they were
determined to "get this done this year."
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