Earlier this week, the Trump administration released a set of principles and provisions for guiding tax reform. Presented by Treasury Secretary Mnuchin and NEC Director Cohn, the plan incorporated many of Trump's campaign promises but provided few specifics on how such a plan would work. Secretary Mnuchin and Director Cohn both declined to comment on when the full details of the plan will be available but they noted that the administration is "determined to move as fast as we can and get this done this year."
Personal Provisions
- The current 7 tax brackets will be reduced to three brackets of 10%, 25%, and 35% (income brackets not yet established)
- The standard deduction will be doubled to $24,000 for couples (down from $30,000 in campaign proposals)
- All deductions will be eliminated apart from the mortgage interest and charitable deductions
- The proposal will include childcare and dependent care expense relief
- AMT will be fully repealed
- 3.8% net investment tax will be eliminated to return top capital gains rate to 20%
- Estate tax will be fully repealed upon implementation of new tax regime (no phase-out)
Business Provisions
- 15% rate available to all businesses, including pass-throughs and small and medium-sized entities
- Move to territorial taxation system
- One-time tax on overseas profits
- No specifics on rate but it "will be very competitive"
- Whether contractors and freelancers will eligible for 15% rate still to be determined
Republican House and Senate leadership were highly supportive of the principles outlined by the White House. Speaker Paul Ryan (R-WI), Senate Majority Leader Mitch McConnell (R-KY), Ways and Means Chairman Kevin Brady (R-TX), and Senate Finance Committee Chairman Orrin Hatch (R-UT) released the following statement:
"The principles outlined by the Trump Administration today will serve as critical guideposts for Congress and the Administration as we work together to overhaul the American tax system and ensure middle-class families and job creators are better positioned for the 21st century economy. Lower rates for individuals and families will allow them to keep more of their hard-earned money and empower them to invest more in their future. Getting tax rates down for American companies, big and small, will create new jobs and make the United States a more inviting place to do business. With an eye toward fairness and simplicity, we're confident we can rebuild our tax code in a way that will grow our economy, better promote savings and investment, provide our job creators with a competitive advantage, and bring prosperity to all Americans."