On April 26, 2017 Secretary of the US Department of the Treasury, Steven Mnuchin, and National Economic Council Director, Gary Cohn, discussed the hotly anticipated tax reform measures we had all been waiting for at the press briefing, “2017 Tax Reform: Economic Growth and American Jobs” (White House briefing).
This blog post highlights the key corporate tax and personal tax proposals from the press briefing, including the deduction of the corporate tax rate, the repeal of the estates tax and alternative minimum tax, the decrease in personal income tax brackets, the elimination of income tax deductions on a couple’s income earnings under $24,000, and much more.
CORPORATE TAX PROPOSALS
Secretary of the US Department of the Treasury, Steven Mnuchin, opened the White House briefing by stating that the Trump administration wants to “make US businesses the most competitive in the world.”[1] However, with Ireland’s corporate tax rate of 12.5%, and other countries with lower corporate tax rates, there may still be competitive hurdles for the Trump administration to heighten competition.
The corporate tax rate has been cut from 35% to 15% on worldwide income and deferrals. Mnuchin mentioned that the Trump administration will “make it a territorial system” instituting a onetime tax on overseas profits “which will bring back trillions of dollars that are offshore to be invested here in the United States.”[2]
Small and medium sized businesses will be eligible for the 15% corporate tax rate. Specific requirements and details to be determined.
Border adjustability, carbon tax, and a value-added tax, that were rumoured in the weeks leading up to the tax reform announcement[3] were not part of the White House briefing on April 26, 2017.
PERSONAL INCOME TAX PROPOSALS
President Trump’s tax reform includes measures that he believes will provide tax relief for low-and-middle income families. The April 26, 2017 tax reform announcement proposes a complete overhaul of personal income tax brackets. Proposed is a reduction from seven to three income tax brackets of 10%, 25%, and 35%. The proposed tax reform also doubled the standard deduction for married couples; however taxpayers and practitioners will need to wait on details on the definition of married couple under the legislation (to be drafted). There is a lack of details on the taxable income brackets. Cohn and Mnuchin state that those details will be formed in the legislation to be drafted after discussions with the House and the Senate.
National Economic Council Director, Gary Cohn, stated that the alternative minimum tax “required taxpayers to do their income tax twice to see which is higher. That makes no sense, and we should have one simple tax code.”[4]
Gary Cohn stated that the capital tax rate and dividend rate is returned to 20% and this proposed plan repeals the 3.8% Affordable Care Act tax on dividends and capital gains, which Cohn stated “was a hit on investment income and small business owners.”[5] The repeal of the estate tax is proposed in order to save farmers and small business owners from “wasting countless hours and resources on complicated estate planning to make sure their children aren’t hit with a huge tax when they die.”
Tax breaks “for mainly high income individuals” will be eliminated; however the home ownership and charitable gift tax deductions will be protected. The other tax benefits to be eliminated were not discussed any further in the White House briefing.
Conclusion
There are many details about the proposals that need to be released. A member of the press in attendance at the White House briefing asked Mnuchin when details and definitions would be released, to which he responded, “We’re working as fast as we can.”[6] Simplification of the tax code was a repetitive theme. All proposed measures must pass through Congress, so we will have to be patient. The Trump Administration will hold stakeholder input sessions and will work with the House of Representatives and the Senate to develop the details of the plan. Stay tuned to Taxnet Pro for future developments on the United States Trump administration tax reform in the future.
[1] White House, “Briefing with Secretary of the Treasury Steven Mnuchin and National Economic Director Gary Cohn,” April 26, 2017, online: https://www.whitehouse.gov/live/briefing-secretary-treasury-steven-mnuchin-and-national-economic-director-gary-cohn
[3] Grant Thornton, “Trump promising new tax plan this week,” April 24, 2017, online.
[4] White House, “Briefing with Secretary of the Treasury Steven Mnuchin and National Economic Director Gary Cohn,” April 26, 2017, online: https://www.whitehouse.gov/live/briefing-secretary-treasury-steven-mnuchin-and-national-economic-director-gary-cohn