Trump Tax Reform: Tax Cuts on Corporations and the Wealthy – What This Means for America
During President Trump’s campaign for the Oval Office, he promised to overhaul the federal tax structure for both businesses and individuals with major tax reforms. In the past week, what is slowly starting to emerge is more of a tax relief plan, which could still deliver on campaign promises. Trump’s changes in the taxation structure do have several benefits and are not entirely focused on major corporations or the wealthy.
Currently, the corporate tax rate in the United States is one of the highest in the world. Trump’s tax plan calls to reduce the tax rate from 35% to 15%. However, some Republicans feel this is too deep of a cut and have countered with reducing it to 20%. Trump would also like to eliminate AMT (alternative minimum tax) for businesses. However, in exchange for reducing the tax rate, businesses would lose several deductions and would only be left with the research and development (R&D) tax credit for R&D conducted solely within the U.S.
Small and Medium Businesses
Small and medium businesses would also see tax rates cut to 15%, but could still end up paying a maximum of 25%, depending on their type of business structure. The AMT would also be repealed.
For wealthy Americans, Trump’s tax cut plan calls to do away with the current tax bracket structures and cut these down to a total of three, based upon income. Individuals earning more than $112,500, and married couples earning more than $225,000, would have a tax rate of 33%. For the middle class earning between $75,000 and $225,000, the new tax rate would be 25%. For those earning less than $75,000, the new tax rate would be 12%.
The standard deduction rates would also increase, but, in exchange, personal exemptions would no longer be allowed. For individuals, their standard deduction would increase to $15,000, up from the current $6,300. For married couples, their standard deduction would jump to $30,000, compared to $12,600 currently.
Other changes for individuals include:
- Eliminating Net Investment Income Taxes
- Creating Three Tax Brackets for Capital Gains (0%, 15%, and 20%)
- Repealing AMT
- Capping of Itemized Deductions ($100,000 or $200,000)
- Repealing Estate Taxes
It will be interesting to see what tax reforms do take place. For individuals and married couples, the proposed changes could help further strengthen economic growth, as consumers will have more money to spend because they will be paying fewer taxes.
However, part of the obstacle facing the new president is being able to develop a tax plan that brings relief while at the same time does not drive up the deficit. Finding this balance is also going to require getting support from within the parties of Republicans and the Democrats.
Businesses concerned about changes in tax laws should enlist the help of DC lobbying firms to ensure their concerns are heard. To learn more about what lobbyists are and how they can help your business, contact LobbyIt at 202-587-2736 today!
Leave a ReplyWant to join the discussion?
Feel free to contribute!