Trump tax plan: Relief for his voters but lots of unknowns
- Author: Eleanor Harrison May 09, 2017,
May 09, 2017, 3:59
The White House today unveiled an outline of President Donald Trump's plan to reform the USA tax code.
Trump has proposed reducing the number of tax rates from seven to three - 10 percent, 25 percent and 35 percent. And the corporate tax rate could plummet from 35 percent to 15 percent, giving the US one of the lowest corporate tax rates in the world.
Trump's new plan is silent on this issue as well.
The principles of his tax plan - presented Wednesday in a one-page document - offered enough detail to suggest that Trump's preferred tax changes will add a ton to deficits.
Since student loan tax credits aren't itemized deductions, they may be safe under the new tax plan.
During the campaign, Trump released a tax proposal that would eliminate the personal exemption.
It's a sensitive subject for a White House that is telling Americans its proposed cuts to individual and corporate tax rates would aid the middle class and fuel stronger economic growth.
But as mentioned above, state and local tax (SALT) deductions would no longer be available. It simply says Trump wants to "eliminate targeted tax breaks that mainly benefit the wealthy" and "eliminate tax breaks for special interests".
"We should see his tax returns", said Frank Clemente, the executive director of Americans for Tax Fairness in Washington. Many claim the standard deduction every year.
Under current tax rules, your heirs must pay 40 percent in taxes on any assets they inherit in excess of $5.49 million ($10.98 million for married couples).
The plan would slash corporate taxes and almost double the standard deduction for married couples to $24,000.
Even with the standard deduction doubling, the average taxpayer may not save much money from the new tax plan.
Those deductions cost the federal government more than $60 billion a year, according to the nonpartisan Tax Policy Center.
But the top one percent of earners would see a 14 percent increase in after-tax income. Marr says scrapping the state and local provision would have the biggest impact and would largely hurt Americans in "blue", or Democratic states on the coasts that pay higher state and local tax rates.
The 28 percent alternative minimum tax for high-income households would disappear. It has evolved over the years and now impacts about 5 million households, majority making between $200,000 and $1 million a year.
A proposal made by the Trump administration Wednesday would likely cause middle-class and wealthy Californians who itemize their federal tax returns to pay hundreds or thousands of additional tax dollars each year.
For example, Treasury Secretary Steve Mnuchin says it will be the biggest tax cut and the largest tax reform in USA history.
Officials cautioned the details are still being worked out, but said a boost in economic growth will help offset a growing deficit.