Here Is The Leaked Trump Tax Plan

Newz ^ | 09/27/2017

[SeekAndFind]

This afternoon, during a speech in Indianapolis, President Trump was expected to reveal, for the first time, the details of the long-anticipated Republican tax reform proposal that calls for substantial business and individual tax cuts. But in a political era where every little thing is leaked to the media, we no longer have to wait for presidential speeches to learn the details of key pieces of legislation.  As such, below is a 9-page summary of Trump's tax plan courtesy of the latest leaks.

Here are the highlights:

GOALS

The Trump Administration, the House Committee on Ways and Means, and the Senate Committee on Finance have developed a unified framework to achieve pro-American, fiscally-responsible tax reform. This framework will deliver a 21st century tax code that is built for growth, supports middle-class families, defends our workers, protects our jobs, and puts America first. It will deliver fiscally responsible tax reform by broadening the tax base, closing loopholes and growing the economy. It includes:

• Tax relief for middle-class families.
• The simplicity of “postcard” tax filing for the vast majority of Americans.
• Tax relief for businesses, especially small businesses.
• Ending incentives to ship jobs, capital, and tax revenue overseas.
• Broadening the tax base and providing greater fairness for all Americans by closing special interest tax breaks and loopholes.

Personal Tax Rates:  As expected, Trump's plan includes a doubling of standard deductions with a consolidation of tax brackets and the suggestion that a new top end bracket may be created to "ensure that the reformed tax code is at least as progressive as the existing tax code and does not shift the tax burden from high-income to lower- and middle-income taxpayers."

The framework simplifies the tax code and provides tax relief by roughly doubling the standard deduction to:

• $24,000 for married taxpayers filing jointly, and
• $12,000 for single filers.

 

Under current law, taxable income is subject to seven tax brackets. The framework aims to consolidate the current seven tax brackets into three brackets of 12%, 25% and 35%.

 

Typical families in the existing 10% bracket are expected to be better off under the framework due to the larger standard deduction, larger child tax credit and additional tax relief that will be included during the committee process.

 

An additional top rate may apply to the highest-income taxpayers to ensure that the reformed tax code is at least as progressive as the existing tax code and does not shift the tax burden from high-income to lower- and middle-income taxpayers.

Alternative Minimum Tax: Eliminated.

The nonpartisan Joint Committee on Taxation (JCT) and the Internal Revenue Service (IRS) Taxpayer Advocate have both recommended repealing the AMT because it no longer serves its intended purpose and creates significant complexity. This framework substantially simplifies the tax code by repealing the existing individual AMT, which requires taxpayers to do their taxes twice.

Itemized Deductions:  Keeps home mortgage interest and charitable deductions but eliminates all others including the "State and Local Tax" deduction which will mostly impact folks in the high-tax blue states of New York, New Jersey and California (but our understanding is that NY, NJ and CA residents want to pay higher taxes...so it's really a win for everyone).

In order to simplify the tax code, the framework eliminates most itemized deductions, but retains tax incentives for home mortgage interest and charitable contributions. 

Death Tax: Eliminates "death tax" and generation-skipping transfer tax.

Small Business Tax Rates:  Capped at 25%

The framework limits the maximum tax rate applied to the business income of small and family owned businesses conducted as sole proprietorships, partnerships and S corporations to 25%.

Corporate Tax Rates:  Reduced to 20%

The framework reduces the corporate tax rate to 20% – which is below the 22.5% average of the industrialized world. In addition, it aims to eliminate the corporate AMT, as recommended by the non-partisan JCT. The committees also may consider methods to reduce the double taxation of corporate earnings.

Capital Investment Expensing:  Immediate expensing.

The framework allows businesses to immediately write off (or “expense”) the cost of new investments in depreciable assets other than structures made after September 27, 2017, for at least five years.

C-Corp Interest Expense:  Caps interest expense deduciton via some yet TBD formula.

The deduction for net interest expense incurred by C corporations will be partially limited. The committees will consider the appropriate treatment of interest paid by non-corporate taxpayers.

Repatriation:  Enacts "100% exemption" for dividends from foreign subsidiaries

The framework transforms our existing “offshoring” model to an American model. It ends the perverse incentive to keep foreign profits offshore by exempting them when they are repatriated to the United States. It will replace the existing, outdated worldwide tax system with a 100% exemption for dividends from foreign subsidiaries (in which the U.S. parent owns at least a 10% stake).

 

To transition to this new system, the framework treats foreign earnings that have accumulated overseas under the old system as repatriated. Accumulated foreign earnings held in illiquid assets will be subject to a lower tax rate than foreign earnings held in cash or cash equivalents. Payment of the tax liability will be spread out over several years.

Noticeably absent in Trump's tax plan is any mention of the treatment of "carried interest"...a hot-button topic for hedge funds and private equity managers that reap the rewards of having the majority of their income treated at "capital gains" rather than "personal income."

Of course, the real question is whether the bill has even the slightest chance of passing both houses of Congress or if will soon meet the same fate as the failed Obamacare repeal bills.

And the initial market reaction seems to be disappointment...

* * *

Update 1:  To our complete 'shock', Democrats have already taken to the media to bash Trump's tax proposal as a "windfall for the weathly" even though the plan explicitly contemplates a new top end personal tax bracket to "ensure that the reformed
tax code is at least as progressive as the existing tax code and does
not shift the tax burden from high-income to lower- and middle-income
taxpayers."  

SCHUMER: GOP TAX PROPOSALS WON'T FLY WITH AMERICAN PEOPLE

SCHUMER: GOP TAX PROPOSALS WOULD RESULT IN WINDFALL FOR WEALTHY

WYDEN: GOP TAX PLAN BREAKS TRUMP PLEDGE THAT RICH WOULDN'T GAIN'

Meanwhile, Senator Wyden somehow concluded that a "lack of detail" necessarily confirms that the middle class is about to get screwed by the Trump administration...we're waiting to hear from Wyden on whether that lack of detail also confirms that Trump colluded with the Russians in 2016.

WYDEN: LACK OF DETAIL IN PLAN MEANS MIDDLE-CLASS WILL BE HIT

And, of course, Pelosi had to chime in by stringing together a series of buzz words to form non-sensical statements:

PELOSI: GOP WILL GO AFTER SOC. SEC, MEDICARE TO PAY FOR PLAN

PELOSI: GOP STILL PURSUING TRICKLE-DOWN AGENDA

[Timmy]

I’m in Missouri (6% state income tax). No child credits anymore. Don’t think this does much for me.

[Eccl 10:2]

If they eliminate the Personal Exemptions, which previous iterations have done, I don’t see how I benefit from this.

If Trump hoses me on this, then I’m done with him.

[cherry]

personal exemptions and standard deductions are different animals...

the PE for two people would be $8100...loose that....but the standard deduction would be $24000...so a net gain of $4000 approx.?

[central_va]

It all depends on where that 25% bracket starts. Nobody will say.

[TheCipher]

It all depends on where that 25% bracket starts. Nobody will say.

Right. They do things like increase deductions but can take care of that on the other end by adjusting the tables.

[central_va]

I feel a screw job.

[Cowgirl of Justice]

Another leaker.

Why am I not surprised.

[SeekAndFind]

RE: I’m in Missouri (6% state income tax). No child credits anymore. Don’t think this does much for me.

It says in the article:

“Typical families in the existing 10% bracket are expected to be better off under the framework due to the larger standard deduction, larger child tax credit and additional tax relief that will be included during the committee process.”

[TheCipher]

[central_va]

The screw is inserted too high.

[Timmy]

But they removed the deduction for state income taxes.

[DoodleDawg]

A lot will depend on what the new tax brackets are, but right now I don’t see how I will be able to avoid paying more taxes. State and Federal since I don’t see Missouri making the same kind of adjustments.

[amihow]

Seniors hosed big time too.

[River_Wrangler]

Itemized Deductions: Keeps home mortgage interest and charitable deductions but eliminates all others including the "State and Local Tax" deduction which will mostly impact folks in the high-tax blue states of New York, New Jersey and California (but our understanding is that NY, NJ and CA residents want to pay higher taxes...so it's really a win for everyone).

This is a win for the no income tax people in states like Texas who have had to pay/subsidize income tax states for their reckless spending.

Thank you President Trump!!!

[DoodleDawg]

Seniors hosed big time too.

If this was a trial balloon it isn't going to go far.

[sarge83]

Hey the Republican congress is writing it why the concern?

The same bunch that can’t repeal obamacare, fully funded it, and passed a tax increase under obama, and have just worked themselves to death all of 2017, do NOTHING. What could go wrong?

[oincobx]

l believe he is referring to the personal exemption of $4,050 per member of the household. So if you are a family of four and you took the standard deduction last year, you had 12,000 + 16,2000 = 28,200 reduced from gross income. This hear that family of four gets 24,000. So a family of 3 is the break even. Then it will come down to how large the increase in the child tax credit will be.

[Mike-o-Matic]

>> My only recourse around this is to shelter a lot of
>> gross income in tax-deferred retirement accounts.

Grand, ain't it? But of course, "tax-deferred" ain't the same as "tax exempt" so you'll be paying it eventually anyway.

>>I’m a pass-through sole proprietor and I have to pay
>>both ends of social security. My effective tax rate is
>>substantially higher than most corporations.

Yep, as well as Mediscare. I agree with you 100%, it's inherently harmful and punitive to small business owners... the backbone of American commerce. But I guess small business doesn't have (or rather, can't afford) the right lobbyists.

[WVMnteer]

People are going to flip the hell out over not being able to deduct their state and local taxes. I’m in Texas now so I’m happily unaffected by that.

[Mike-o-Matic]

>> Capital Gains?

Yes please! As much of them as possible. :-)

Seriously though: From what I've been able to gather today (spotty at best) there is no current plan to change the rates on long-term gains. I have no idea if the brackets/breakpoints will have to change from the current ones though.

For short term gains, it's less clear to me what will happen, although owing to their higher tax rate compared to long-term gains, it's been speculated that the short-term rates will be lowered somewhat.

Of course, all of this may be changed or bargained away in negotiation. Personally I don't think it's worth trusting what was proposed yet, it'll probably get screwed around with so much we won't recognize it afterward.