Members of President Trump’s cabinet (Secretary Mnuchin and National Economic Director Gary Cohn) released a 1-page list of items he wants in a tax reform plan. CNN has the 1-pager posted here.
A few observations (I’ll have more later):
The plan is quite similar to what Trump talked about and had posted on his website during the presidential campaign.
The plan doesn’t say how tax rates will be lowered for everyone in a revenue neutral manner. While the expectation underlying the proposals is that economic growth will occur to generate more revenue, that’s not an exact science. If “rosy” projections are made, fewer deductions, exclusions and credits have to be cut back to “pay for” the lowered rates. If a more conservative projection is computed, more tax breaks have to be eliminated or cut back. I’m guessing we’ll see very rosy projections of the economic effects of tax reform.
During the campaign his individual tax reform plan matched the House Republican plan for the individual rate structure – 12%, 25% and 33%. This plan always seemed a bit odd as a tax cut to sell to the public because today, the lowest rate is 10% (and the highest is 39.6%).
The rates in today’s release are 10%, 25% and 35%. So, it seems that the Administration realized that it might be hard to sell a tax cut on the premise that the lowest rate today is increased. And, perhaps he is listening to Treasury Secretary Mnuchin who had indicated top rates should not be lowered, as President Trump’s new plan says the top rate would be dropped to 35% rather than to 33%.
More later.
What do you think?
Annette Nellen, CPA, Esq., is a professor in and director of San Jose State University’s graduate tax program (MST), teaching courses in tax research, accounting methods, property transactions, state taxation, employment tax, ethics, tax policy, tax reform, and high technology tax issues.
Annette is the immediate past chair of the AICPA Individual Taxation Technical Resource Panel and a current member of the Executive Committee of the Tax Section of the California Bar. Annette is a regular contributor to the AICPA Tax Insider and Corporate Taxation Insider e-newsletters. She is the author of BNA Portfolio #533, Amortization of Intangibles.
Annette has testified before the House Ways & Means Committee, Senate Finance Committee, California Assembly Revenue & Taxation Committee, and tax reform commissions and committees on various aspects of federal and state tax reform.
Prior to joining SJSU, Annette was with Ernst & Young and the IRS.
1 comment on “President Trump’s 1-Page Tax Plan”
Annette, thank you for your thoughtful insights. On the memo that was released, the change in tax brackets is listed under the heading of “Tax relief for…middle-income families”. Anyone making the top tax bracket is not middle-income. So any change of the top bracket is serving the wealthy.
I suspect that Trump/Mnunchin would sacrifice reducing top brackets to achieve compromise.
What do you think?
Comments are closed.