Everything in the national news these days seems to focus on Russia investigations and the GOP’s efforts to replace Obamacare. This is unfortunate for President Trump, who had high hopes of quickly implementing a sweeping tax code overhaul and reform. While it is unlikely that congress will even take any substantive steps toward tax reform in the near future, it is worth reviewing some of these prospective reforms as taxpayers.
President Trump announced his proposed reforms in a memo entitled “2017 Tax Reform for Economic Growth and American Jobs”. Overall, the stated goals are to provide tax relief to middle class families, to spur job growth, and to lower business tax rates.
Individual Tax Brackets
Currently, the tax code contains seven income tax brackets 10%, 15%, 25%, 28%, 33%, 35%, 39.6%. The lowest bracket is for individuals with taxable income less than $9325 and for married couple with joint income of less than $18,650. The highest bracket is for individuals with taxable income of $418,400 or more and for married couples filing jointly with taxable income of $470,700 of more.
In contrast, President Trump is proposing a reduction in tax brackets from seven to three. The new brackets would be set at 10%, 25%, and 35%; however, the President’s advisers have not specified the taxable income levels within each bracket. In addition the proposal seeks to: (1) double the standard deduction; (2) provide tax relief for child care expenses; (3) repeal the alternative minimum tax; and (4) repeal the death tax.
Business Tax Relief
For businesses, Trump’s proposal sets the business tax rate at 15%. The proposal would also establish a territorial tax system, which means that companies would only owe taxes on revenues earned on American soil. Many corporations are in favor of switching to the territorial tax system. Further, there would be a one time tax on money held by American taxpayers overseas and a reform of tax breaks for special interests.
Trump’s Tax Reform Prospects Murky
In addition to the legislature’s current focus on passing healthcare reform and Russia probes, there are additional obstacles to President Trump’s tax proposal becoming a foreseeable reality. One is that the administration has not yet specified any additional revenues that would offset the cuts and balance the budget. More significantly, any permanent tax reform legislation cannot get the sixty votes needed for passage in the Senate, and would require a procedural change to overcome a filibuster from Democrats. So far, GOP Senators have been resistant to such a dramatic change.
Just because the Internal Revenue Code and the IRS are going through a period of uncertainty does not mean that you have to. For over twenty years, I have guided clients through complex tax issues. In addition, I regularly review changes to the status of federal tax laws so I can always provide current, relevant legal advice. My team and I will provide you with knowledgeable, comprehensive advice through any federal tax matter. The Law Offices of Robert S. Thomas are here to help you. Call us today by phone at 847-392-5893 or visit our website to set up a consultation.