- Donald Trump « Tax Reform
TAX REFORM THAT WILL
MAKE AMERICA GREAT AGAIN
The Goals Of Donald J. Trump's Tax Plan
- Tax relief for middle class Americans: In order to achieve the American dream, let people keep more money in their pockets and increase after-tax wages.
- Simplify the tax code to reduce the headaches Americans face in preparing their taxes and let everyone keep more of their money.
- Grow the American economy by discouraging corporate inversions, adding a huge number of new jobs, and making America globally competitive again.
- Doesn't add to our debt and deficit, which are already too large.
The Trump Tax Plan Achieves These Goals
- If you are single and earn less than $25,000, or married and jointly earn less than $50,000, you will not owe any income tax. That removes nearly 75 million households – over 50% – from the income tax rolls. They get a new one page form to send the IRS saying, “I win,” those who would otherwise owe income taxes will save an average of nearly $1,000 each.
- All other Americans will get a simpler tax code with four brackets – 0%, 10%, 20% and 25% – instead of the current seven. This new tax code eliminates the marriage penalty and the Alternative Minimum Tax (AMT) while providing the lowest tax rate since before World War II.
- No business of any size, from a Fortune 500 to a mom and pop shop to a freelancer living job to job, will pay more than 15% of their business income in taxes. This lower rate makes corporate inversions unnecessary by making America’s tax rate one of the best in the world.
- No family will have to pay the death tax. You earned and saved that money for your family, not the government. You paid taxes on it when you earned it.
The Trump Tax Plan Is Revenue Neutral
The Trump tax cuts are fully paid for by:
- Reducing or eliminating most deductions and loopholes available to the very rich.
- A one-time deemed repatriation of corporate cash held overseas at a significantly discounted 10% tax rate, followed by an end to the deferral of taxes on corporate income earned abroad.
- Reducing or eliminating corporate loopholes that cater to special interests, as well as deductions made unnecessary or redundant by the new lower tax rate on corporations and business income. We will also phase in a reasonable cap on the deductibility of business interest expenses.
DETAILS OF DONALD J. TRUMP’S TAX PLAN
America needs a bold, simple and achievable plan based on conservative economic principles. This plan does that with needed tax relief for all Americans, especially the working poor and middle class, pro-growth tax reform for all sizes of businesses, and fiscally responsible steps to ensure this plan does not add to our enormous debt and deficit.
This plan simplifies the tax code by taking nearly 50% of current filers off the income tax rolls entirely and reducing the number of tax brackets from seven to four for everyone else. This plan also reduces or eliminates loopholes used by the very rich and special interests made unnecessary or redundant by the new lower tax rates on individuals and companies.
The Trump Tax Plan: A Simpler Tax Code For All Americans
When the income tax was first introduced, just one percent of Americans had to pay it. It was never intended as a tax most Americans would pay. The Trump plan eliminates the income tax for over 73 million households. 42 million households that currently file complex forms to determine they don’t owe any income taxes will now file a one page form saving them time, stress, uncertainty and an average of $110 in preparation costs. Over 31 million households get the same simplification and keep on average nearly $1,000 of their hard-earned money.
For those Americans who will still pay the income tax, the tax rates will go from the current seven brackets to four simpler, fairer brackets that eliminate the marriage penalty and the AMT while providing the lowest tax rate since before World War II:
|Income Tax Rate||Long Term Cap Gains/ Dividends Rate||Single Filers||Married Filers||Heads of Household|
|0%||0%||$0 to $25,000||$0 to $50,000||$0 to $37,500|
|10%||0%||$25,001 to $50,000||$50,001 to $100,000||$37,501 to $75,000|
|20%||15%||$50,001 to $150,000||$100,001 to $300,000||$75,001 to $225,000|
|25%||20%||$150,001 and up||$300,001 and up||$225,001 and up|
With this huge reduction in rates, many of the current exemptions and deductions will become unnecessary or redundant. Those within the 10% bracket will keep all or most of their current deductions. Those within the 20% bracket will keep more than half of their current deductions. Those within the 25% bracket will keep fewer deductions. Charitable giving and mortgage interest deductions will remain unchanged for all taxpayers.
Simplifying the tax code and cutting every American’s taxes will boost consumer spending, encourage savings and investment, and maximize economic growth.
Business Tax Reform To Encourage Jobs And Spur Economic Growth
Too many companies – from great American brands to innovative startups – are leaving America, either directly or through corporate inversions. The Democrats want to outlaw inversions, but that will never work. Companies leaving is not the disease, it is the symptom. Politicians in Washington have let America fall from the best corporate tax rate in the industrialized world in the 1980’s (thanks to Ronald Reagan) to the worst rate in the industrialized world. That is unacceptable. Under the Trump plan, America will compete with the world and win by cutting the corporate tax rate to 15%, taking our rate from one of the worst to one of the best.
This lower tax rate cannot be for big business alone; it needs to help the small businesses that are the true engine of our economy. Right now, freelancers, sole proprietors, unincorporated small businesses and pass-through entities are taxed at the high personal income tax rates. This treatment stifles small businesses. It also stifles tax reform because efforts to reduce loopholes and deductions available to the very rich and special interests end up hitting small businesses and job creators as well. The Trump plan addresses this challenge head on with a new business income tax rate within the personal income tax code that matches the 15% corporate tax rate to help these businesses, entrepreneurs and freelancers grow and prosper.
These lower rates will provide a tremendous stimulus for the economy – significant GDP growth, a huge number of new jobs and an increase in after-tax wages for workers.
The Trump Tax Plan Ends The Unfair Death Tax
The death tax punishes families for achieving the American dream. Therefore, the Trump plan eliminates the death tax.
The Trump Tax Plan Is Fiscally Responsible
The Trump tax cuts are fully paid for by:
- Reducing or eliminating deductions and loopholes available to the very rich, starting by steepening the curve of the Personal Exemption Phaseout and the Pease Limitation on itemized deductions. The Trump plan also phases out the tax exemption on life insurance interest for high-income earners, ends the current tax treatment of carried interest for speculative partnerships that do not grow businesses or create jobs and are not risking their own capital, and reduces or eliminates other loopholes for the very rich and special interests. These reductions and eliminations will not harm the economy or hurt the middle class. Because the Trump plan introduces a new business income rate within the personal income tax code, they will not harm small businesses either.
- A one-time deemed repatriation of corporate cash held overseas at a significantly discounted 10% tax rate. Since we are making America’s corporate tax rate globally competitive, it is only fair that corporations help make that move fiscally responsible. U.S.-owned corporations have as much as $2.5 trillion in cash sitting overseas. Some companies have been leaving cash overseas as a tax maneuver. Under this plan, they can bring their cash home and put it to work in America while benefitting from the newly-lowered corporate tax rate that is globally competitive and no longer requires parking cash overseas. Other companies have cash overseas for specific business units or activities. They can leave that cash overseas, but they will still have to pay the one-time repatriation fee.
- An end to the deferral of taxes on corporate income earned abroad. Corporations will no longer be allowed to defer taxes on income earned abroad, but the foreign tax credit will remain in place because no company should face double taxation.
- Reducing or eliminating some corporate loopholes that cater to special interests, as well as deductions made unnecessary or redundant by the new lower tax rate on corporations and business income. We will also phase in a reasonable cap on the deductibility of business interest expenses.
More details of Donald J. Trump's tax plan can be found here:
- Mr. Trump’s tax plan would substantially lower individual income taxes and the corporate income tax and eliminate a number of complex features in the current tax code.
- Mr. Trump’s plan would cut taxes by $11.98 trillion over the next decade on a static basis. However, the plan would end up reducing tax revenues by $10.14 trillion over the next decade when accounting for economic growth from increases in the supply of labor and capital.
- The plan would also result in increased outlays due to higher interest on the debt, creating a ten-year deficit somewhat larger than the estimates above.
- According to the Tax Foundation’s Taxes and Growth Model, the plan would significantly reduce marginal tax rates and the cost of capital, which would lead to an 11 percent higher GDP over the long term provided that the tax cut could be appropriately financed.
- The plan would also lead to a 29 percent larger capital stock, 6.5 percent higher wages, and 5.3 million more full-time equivalent jobs.
- The plan would cut taxes and lead to higher after-tax incomes for taxpayers at all levels of income.
Yesterday, Donald J. Trump released details of a tax reform plan. This plan would reduce individual income tax rates, lowering the top rate from 39.6 percent to 25 percent and creating a large zero bracket. The plan would also reform the business tax code by reducing the income tax on all businesses to 15 percent and eliminate business tax expenditures, including deferral and interest deductions. In addition, the plan would eliminate the Estate Tax and the Alternative Minimum Tax.
While some aspects of the plan remain unspecified, many others are very clear, working within the existing income tax framework and lowering the rates. As such, we are able to model virtually all of the major provisions of the plan.
Our analysis finds that the plan would
reduce federal revenues by
$11.98 trillion over the next decade. However, it also would improve
incentives to work and invest, which could increase gross domestic
product (GDP) by 11 percent over the long term. This increase in GDP
would translate into 6.5 percent higher wages and 5.3 million new
full-time equivalent jobs. After accounting for increased incomes due
to these factors, the plan would only reduce tax revenues by $10.14
Americans for Tax Reform
GOP Presidential candidate Donald Trump released details of his tax reform plan today. It features a system with much lower tax rates than current law, and a broadened tax base for high income earners.
“Trump’s plan is certainly consistent with the Taxpayer Protection Pledge,” said Grover Norquist, president of Americans for Tax Reform. “Trump has said he opposes net tax hikes and has made clear that the real problem is spending. This plan is a reform, not a tax hike.”
The plan is not a tax cut, but is rather intended to be revenue neutral under a dynamic score.
Basic elements of the Trump tax plan include:
Carried interest: The plan "ends the current tax treatment of carried interest for speculative partnerships that do not grow businesses or create jobs and are not risking their own capital." Partnerships that do not speculate but rather buy hard assets for the long run will not face a tax increase – for example, private equity firms.
Private equity firms do not speculate, but rather grow businesses and create jobs. Most importantly, private equity partnerships risk their own capital, namely the capital provided by the pension funds, colleges, and charities which invest in them for long term investment returns. These types of investments are vital for workers with traditional pensions, for the colleges Americans send their children to, and for the charities they support.
The carried interest tax hike in the Trump plan is intended to only apply to the type of funds Trump has always said they would apply to: "hedge fund guys." Americans for Tax Reform opposes any change to the tax treatment of carried interest -- including those on hedge fund guys -- but is pleased that the usual target of this left wing ivory tower tax hike proposal--private equity partnerships -- is held harmless in the Trump plan. This is not the case, for example, in Governor Jeb Bush's plan.
As the rest of the GOP field prepares to release their tax plans, they should keep in mind the Left's long term goal to tax ALL capital gains as ordinary income. That's why this carried interest tax hike idea originated in the bowels of leftist academia, and is nearly universally supported by the progressive Left -- it's the camel's nose under the tent toward taxing all capital gains at ordinary rates. Republicans and conservatives should not give aid and comfort to this long term strategy.
ATR has detailed the case against carried interest tax hikes with op-eds in USA Today and Forbes.
Capital gains and dividends: By repealing Obamacare's savings surtax, the capital gains and dividends rate is reduced from 23.8 percent today to 20 percent under the Trump plan.
It's also important to note that with a top ordinary income tax rate of 25 percent, the carried interest tax rate hike on "hedge fund guys" is fairly modest, rising from 23.8 percent today to 25 percent under the Trump plan. ATR opposes this tax increase.
Business tax rate: The tax rate on corporate and non-corporate businesses is 15 percent, down from 35 percent today for corporations and 39.6 percent for pass-through firms.
Death Tax: Repealed.
Alternative Minimum Tax (AMT): Repealed.
Marriage Penalty: Repealed.
The plan is intended to be revenue-neutral under a dynamic analysis. In order to make up the remaining lost revenue, the plan features the following major base broadeners:
Deduction phase out: All itemized deductions except for charitable contributions and mortgage interest will be subject to a steeper means-test phaseout than they face under current law.
Deemed repatriation and an end to deferral: An immediate "deemed repatriation" tax of 10 percent is assessed on the $2.5 trillion of U.S. company profits sitting overseas. Going forward, companies would no longer be able to defer U.S. double tax on profits earned overseas.
According to the OECD, the U.S. business tax rate would fall from highest in the developed world to one of the lowest. When state rates are factored in, the U.S. would face the same tax rate as the United Kingdom, and lower tax rates than trading competitors China, Japan, Canada, Mexico, Germany, and France. We would be far below the developed nation average business marginal tax rate of 25 percent.
The loss of deferral is troubling, but two elements should be kept in mind. First, the new 15 percent tax rate is far lower than the double tax companies face today. Second, businesses will be able to credit against this 15 percent U.S. tax any foreign income tax they have already paid overseas. With one of the lowest tax rates in the developed world, it's very unlikely much if any double taxation will, in fact, occur.
Life insurance tax shelter repealed: Life insurance will no longer be tax-advantaged for high-income taxpayers
Business interest: This deduction will face a phased in cap.
Other deductions and credits: Tax breaks for high-income taxpayers and large firms will also be eliminated, but these are not specified.
No movement to full business expensing: The most disappointing part of the Trump plan is that the tax system would move no closer to full expensing of business fixed investment. Businesses would still be saddled with the complex, distorting, and growth-inhibiting "depreciation" regime where an asset is deducted over several or even many years. Far better would be to move to a full-expensing business cash flow model, where all business inputs including investments are deducted in the year spent. While this is somewhat ameliorated by the far lower tax rates, a lack of progress here is the plan's biggest drawback.
To hear more analysis of Donald Trump's tax plan, listen to the latest podcast of The Grover Norquist Show here.
With the release of Presidential candidate Donald Trump’s tax reform proposal, the BUILD Coalition has issued the following statement:“We are disappointed to see that Mr. Trump’s tax plan calls for a cap on interest deductibility, a proven growth-inspiring provision that is a fixture of the modern tax code,” said BUILD spokeswoman Sabrina Siddiqui. “Plans that seek to limit the deductibility of business interest expenses will not ‘make America great again.’ In fact, they run directly counter to the stated goals of tax reform and fail to encourage long-term growth, create jobs, and strengthen businesses throughout the economy. While we are encouraged that Presidential candidates want to reform the tax code, maintaining full interest deductibility, a normal cost of doing business, is imperative to ensuring these reforms will be successful.”
Businesses United for Interest and Loan Deductibility (BUILD) is a group of small and large businesses in all sectors of our economy including retail, technology, real estate, hospitality, finance, and small businesses and start-ups.The BUILD Coalition supports comprehensive tax reform efforts. However, our aim is to preserve 100 percent interest deductibility, a core component of the tax code for 100 years.