It remains to be seen the specific tax plan that Donald Trump will implement as President of the United States. The effects of Donald Trump’s tax plan will depend on taxpayers’ income and tax planning. Some think that Trump’s plan will significantly reduce income and corporate taxes, and eliminate the estate tax. It seems the plan’s largest effect on individual taxpayers will be to reduce the top tax bracket 6.6 percentage points from 39.6 percent to 33 percent.
Trump’s initial plan released in September 2015, set forth four tax brackets of 0%, 10%, 20% and 25%. In August, just a few months before the election, he released a new plan that adopted the House Republicans’ approach using three tax brackets, 12%, 25% and 33%. Either plan seems to adopt aspects of the tax reform pursued by House Republicans, as the president-elect moves closer to the Republicans’ tax agenda.
Taxpayers already paying 33-percent bracket would pay the same tax under the Trump plan as they do presently. However, in most cases, the Trump plan would seemingly reduce taxes. For example, taxpayers in the current 35-percent bracket or a 39.6-percent bracket would see their taxes reduced under Trump’s tax plan.
However, according to a report by the rightist leaning organization, the Tax Foundation, some taxpayers in the middle-income range would pay a higher rate of taxes. For two groups of taxpayers, rates would rise. For example, taxpayers now in the upper half of the 28-percent bracket would jump to the 33-percent tax bracket. Taxpayers at the very lowest bracket, the 10-percent bracket, would have taxes increased to 12 percent.
Despite this increase for some taxpayers, Trump’s plan would reduce taxes, leaving at least 0.8 percent more after-tax income for every taxpayer. Higher-income taxpayers would benefit most from Trump’s plan as it would lead to minimally 10.2 percent higher incomes for the top one percent of taxpayers to as much as 16.0 percent higher.
Trump also proposed to equalize tax rates for business income at 15%, regardless of whether their income is pass-through or corporate. Trump also pledged to suspend and delay any new corporate regulations for the time being.
Like most presidential candidates, Donald Trump promised to reduce taxes. But how will he pay for the loss of tax revenue caused by any reduction in taxes? It promises to be costly. According to the Tax Foundation, revenue available to operate federal programs would diminish by between $4.4 trillion and $5.9 trillion over 10 years.
While Trump plans on reducing spending by $1.2 trillion over the next decade, the estimated revenue cuts will be significantly more, causing, the national debt to grow by approximately $5.3 trillion by 2026. This is an increase of 105 percent based on an estimate by the nonpartisan Committee for a Responsible Federal Budget!
It is wise to consult with an experienced and knowledgeable tax professional to help any taxpayer in the New York or Tri-State area, whether an individual or business, assess their current tax situation looking ahead to the future. If you have any question about taxes, especially in planning ahead for 2017, call THE TAX EXPERTS at the Thorgood Law Firm www.thorgoodlaw.com. For a FREE consultation call 212-490-0704.
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If we only look at income, all tax brackets see their tax rate decline, with the high earners faring the best.
President-elect Donald Trump’s website says working- and middle-class taxpayers would see the biggest tax cuts, in percentage terms, under his plan.