On April 26, 2017, the Trump administration presented an outline of the president’s proposed broad goals of tax reform and his ideas on how those goals should be accomplished. The Trump tax proposal is essentially, at this stage, a blueprint. As stated in the concluding paragraph, the administration foresees holding “listening sessions with stakeholders” throughout May, gathering input, and continuing to work with the House and Senate to develop the details. In short, the tax plan process is now just beginning.
While our tax professionals anticipate a long process, extended negotiations, and extensive partisan commentary from both sides of the aisle and the White House, we believe it is important for us and you as our clients to pay close attention throughout the months ahead. Ultimately, the implications for you as a taxpayer of a tax code overhaul of this potential magnitude could be significant, affecting decisions related to what type of entity choice you may make in future business ventures, the types of personal investment decisions you may make, and much more.
At this early stage of the process, some highlights of the plan include the following:
- The ultimate stated goal of the tax plan is to boost the economy and create jobs. Already, this topic is being debated and will continue to be a hot topic.
- With regard to individuals, the tax plan would double the current standard deduction and have only three income tax brackets for individuals: 10 percent, 25 percent, and 35 percent.
- There would be a flat 15 percent tax on corporations and small businesses, a 20 percent reduction of existing rates.
- The plan does not address a way to offset proposed tax cuts to avoid increasing the deficit. With no details other than an expectation of job growth, many people have expressed concerns about the impact on the deficit.
The details also often produce unexpected complications. For example, the provision above that would double the standard deduction from $12,000 to $24,000 for a married couple filing jointly could create negative implications for single parent households.
Whatever the final outcome of negotiations – and whenever that occurs – we encourage our clients and readers to take an interest in the tax reform process. Because of its brevity, the tax outline leaves many questions unanswered that will result in extensive investigation and debate. In the end, the more you understand how each tax cut could personally impact your tax returns, the more you will be able to communicate with your legislators and express your hopes and concerns. As tax professionals, we will continue to keep you updated through our website blogs on the potential tax changes as they are disclosed. Additionally, we suggest you seek out additional information from the abundance of discourse available from informed and balanced business writers in print and on the Internet.
We view any potential changes to the tax code as important, particularly as they relate to the goal of assisting all taxpayers in simplifying their income tax return preparation process. Because the majority of returns we prepare will be affected by future tax reform policies, we will be following the tax reform process closely so that we are ready to serve you knowledgeably and proactively. And we welcome your input through our blog or by contacting us by email or phone.
For your information, the full text of the tax reform outline can be found here.