Glimpse Of The Billionaire Presidential Mind
By: Josiah Akhtab
Donald Trump proposed a tax plan on September 27, which presented a detailed overview of how to improve individual, international and corporate tax rates to create an increase in revenue and job creation.
His first order is to simplify tax brackets, reducing it to three percentages: 12, 25 and 35, double the standard deduction to $12,000 for individuals and $24,000 for married couples, increase child tax credit, and cut itemized deductions except for charitable donations and mortgage interest.
These are but some of the proposals made for individual income tax.
He also plans to repeal estate and generation-skipping transfer tax (aka the “Death Tax”).
This means there will no longer be taxes for people who die with substantial wealth to pass onto their descendants.
Trump also plans to cut personal and dependent exemptions, add $500 credit for non-child dependents and repeal the AMT (Alternative Minimum Tax).
Observations from Crowe Horwath, local tax site, state the framework doesn’t show anything regarding capital gains and dividends, indicating that favorable stipulations will remain intact.
Crowe Horwath also observes deductions from local and state taxes to be eliminated, suggesting individuals pay fourth quarter payments and itemized deductions before the end of 2017.
Crowe Horwath’s last point states individuals will benefit from itemized deductions in 2017, but those who are subjected to AMT can possibly benefit from deferring charitable deductions in 2018.
When it comes to businesses, Trump plans to reduce corporate taxes from 35 percent to 20 percent, cut alternative corporate minimum tax, and provide low-income housing credit, with all other credit being evaluated by Congress as part of the reform.
This bodes well for small and large businesses alike, as pressure from government taxes will be reduced by a sizeable portion, allowing them to reinvest more of their earnings toward corporate expenses and ventures.
For international affairs, Trump proposes to have tax exemptions from dividends if the U.S. parent owns ten percent of foreign subsidiary, deemed returns of deferred foreign profits with accumulated illiquid assets (stocks, bonds, etc.) receiving lower taxes than cash or cash equivalents, tax payments and rates haven’t been decided.
His last point imposes a Global Minimum Tax on foreign profits for U.S. corporations, as an attempt to level the spectrum for both U.S and foreign corporations; the rates and application of this tax have yet to be decided.
Though this is only a proposed framework, the aim is to make the current tax system simpler and easier to understand for the American public.
The increase of standard deduction and elimination of itemized deductions makes it easier for people to keep more money in their pockets.
Businesses have pressure relieved to increase job creation, which will in turn increase U.S. revenue, reduce unemployment rates and potentially reduce the national deficit.
U.S. corporations that venture internationally receive lower taxes on foreign profits, allowing them to reinvest their earnings as well—so long as the profits aren’t liquid.
The GMT aims to relieve pressure from U.S. and foreign companies who are now subjected to higher tax rates, incentivizing them to bring some of the money back into the country to increase circulation.
Overall, Trump’s tax plan coincides with what he promised in his presidential campaigns, election and inauguration.
Should this frame work become legislation, many corporations and mom and pop businesses will sing his praises.
The individual, however, will most likely have mixed feelings about some of the changes with the cutting of certain exemptions.
Regardless, the increase in standard deductions will sit well.