The Trump Administration released a one page sheet of suggestions to reform the income tax code last week. It is being hailed as the biggest tax cut in American history and is titled the “2017 Tax Reform for Economic Growth and American Jobs…” Unfortunately, this sheet is more like a shopping list for a party that you have no idea how many people are attending. There is not any sort of plan to reform the tax code but there are a few suggestions on what to change. These suggestions are quite aggressive but there are no details on how it will work or what it will truly cost. What successfully makes it through Congress as a law is also yet to be determined. If some of these changes are approved they will provide a lot of tax cuts to anyone who pays income taxes. The cuts would clearly be the most beneficial to large corporations and the extremely wealthy. As we know the POTUS does not like to pay income taxes so these suggestions appear in line with that belief. I do have to agree with his feelings on income taxes though as I do not particularly enjoy paying them either. I do enjoy some of the things that the government provides though. I also understand that these services are paid for by taxes and that someone will have to pay or they go away. How efficient these services are being administered is another topic for another blog.
Here are a few of the suggestions and the possible effects they could have on personal income taxes.
INDIVIDUAL REFORM SUGGESTIONS
- 3 bracket tax system (10%, 25% & 35%)
- This is good for the rich, poor and everyone in between. Not much to explain.
- Double the standard deduction
- This is good for a lot of people who are lower and middle income taxpayers
- Benefits those who do not own homes or have a lot of itemized deductions
- Could benefit those who already itemize too by giving a bigger deduction with less forms
- Will simplify tax return preparation for a lot of taxpayers
- Dependent & Child Care expense relief
- This could help a lot of people with children but there are no details
- Eliminate tax breaks for the wealthy
- We shall see what these end up being
- Questionable given later suggestions
- Again, there are no details
- Protect home mortgage interest and charity deductions
- This helps people who already itemize deductions
- Leans towards the middle & upper income taxpayers
- Not as valuable with the doubling of the standard deduction discussed earlier
- Repeal the Alternative Minimum Tax
- Simplifies tax returns
- Benefits middle and upper income taxpayers who itemize deductions
- Repeal the Death/Estate Tax
- Benefits everyone but mainly the extremely wealthy
- Repeal 3.8% Net Investment Income Tax
- Benefits middle and upper income taxpayers
Even though I feel corporations should pay more taxes and less dividends there would be tax cuts for everyone but without details everything is speculation at this point. We will have to wait and see what becomes law after Congress does their magic. Now that the health are bill is being thrown around there may be some time before any work is done on a tax reform bill.