What is Trump proposing?
President Donald Trump has made some big changes less than half a year into his presidency, one of his most recent being his ever so brief one page proposal to reduce both individual and corporate tax rates. In the United States, there are currently 7 individual tax brackets which are constrained by a tax rate ceiling of 39.6 percent and tax floor of 10 percent. However, Trump’s proposal adjusts this system to three simpler brackets of 10, 25, and 35 percent. Along with this the President would take away the estate and alternative minimum taxes, and diminish corporate taxes by more than 50 percent. Now this may not register with some individuals, so simply put it means this: Trump wants to lower the tax rates for most Americans, primarily targeting the wealthy. For example, when Trump released a fragment of his 2005 tax return it was evident that he paid 31 million solely from the alternative tax, but under the new system he would not have to pay any that. Furthermore, the President wants to eliminate standard tax deductions for individuals on roughly the first $24,000 of a married couple’s earnings. This would then persuade individuals to take the larger standard deduction rather than itemize their tax returns, increasing their profits. Now this is only “the tip of the iceberg” for this proposal as many more details need to be specified before next steps are taken, but that is the basics of what Trump hopes to implement with his tax rate adjustments.
Is this guaranteed to be implemented?
As aforementioned, it is not “smooth sailing” just yet as the proposal is still in its early stages. Trump must have this approved by Capitol Hill; which has prevented numerous attempts at changing the tax system. This is a daunting task for the Republican party alone, so reconciling specific details of the proposal with the Democratic party may be needed. Good news is that as per the Treasury Secretary, Steven Mnuchin, Republicans are open to this, but if needed will spearhead the process alone. That does not mean the Democrats are all in however, “This is an unprincipled tax plan that will result in cuts for the 1 percent… crippling debt for America… offering cakes to the fortunate few” Senator of Oregon Ron Wyden stated. But say the two parties did somehow come to collaborate, it would be in attempt to pass the 60-vote requirement of the Senate and move forward with the propositions approval. To gain that approval, the President must gain support and add a plethora of detail to the currently naked one page proposition.
What does this mean for business/consumers?
It has not been revealed which income levels will be consumed by each tax rate yet as the Republicans view this as a part of the discussion with Capitol Hill. Overall, Americans can expect their income levels along with businesses profits to increase. Now some of you may be thinking that this is great for the economy and will allow for consistent growth for years to come. Well, Donald Trump feels the exact same way, believing that lowering overall taxes would allow for increased jobs, as well as amplified individual/corporate consumption and investment, thereby boosting the United States GDP an estimated 3 percent annually.