Donald Trump has laid out a series of very specific tax reform measures that strive to reduce taxes for both American families and American businesses. The plan intends to incentivize business investment and revitalize the American Economy through a more competitive tax rate while also striving to simplify the tax code.
Individual Income Tax
The Trump Plan will collapse the seven tax brackets down to three for both married-joint filers and single filers. The new brackets for married-joint filers will be as follows: <75,000 (12%), 75,000-225000 (25%), >225000 (33%). Single filer incomes would be half of these amounts. The plan will retain the current capital gains tax while repealing the 3.8 percent Obamacare tax on investment income as well as the alternative minimum tax.
The Trump Plan will increase the standard deductions for joint filers to 30,000 and 15,000 for single filers but will also eliminate both personal exemptions and the head-of-household status. The plan would also repeal the death tax for estates with capital gains less than $10 million and to prevent abuse would also disallow contributions of an estate to a private charity by the descendent or the descendent’s relatives.
The Trump Plan’s focus on childcare starts with establishing a deduction for childcare and eldercare for dependents. This deduction would not be available to taxpayers with incomes greater than $225,000 (single filer) and so the middle and working class would feel most of the benefits of the deduction. The plan also provides rebates to low income taxpayers for childcare expenses as well as the ability to establish Dependent Care Savings Accounts (DCSAs) for which contributions would be capped at $2,000 per year.
The Trump Plan moves to establish a competitive corporate tax rate of 15% and to eliminate the corporate alternative minimum tax, both of which will be available to large and small businesses. There will also be a deemed repatriation of corporate profits held offshore at 10% tax in order to bring companies back to American soil. These two reforms will help the United States once again become a competitive destination for businesses. The Trump Plan also proposes a series of business related child care credits, one being an increase in the business tax credit for on-site childcare from $150,000 to $500,000. Employers that pay for a portion of their employees’ childcare expenses would also be able to exclude those
contributions from income.