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White House Outlines Tax Reform Plan


4/27/17

Synopsis
 
On Wednesday, April 26, 2017, top White House officials released an outline of President Trump’s tax reform plan. White House chief economic advisor Gary Cohn and Treasury Secretary Steven Mnuchin provided a summary of the plan in a press briefing to reporters at the White House. While many details of President Trump’s tax plan remain unknown (administration officials did not release a detailed outline or any legislative text), the White House did provide a one-page fact sheet which asserts that the intended goals for the tax reform plan are to achieve the following:
 
  • Grow the economy and create millions of jobs
  • Simplify our burdensome tax code
  • Provide tax relief to American families, especially middle-income families
  • Lower the business tax rate from one of the highest in the world to one of the lowest
 
A summary of the proposal is provided below:
 
Individuals
 
  • Trump’s tax plan would condense the federal individual income tax brackets from seven to three with rates set at 10%, 25% and 35%. The highest individual income tax rate is currently 39.6%.
  • The plan would double the standard deduction, essentially eliminating taxes on the first $24,000 of a married couple’s earnings.
  • A new child tax credit would be created
  • All itemized deductions would be eliminated except those for mortgage interest, retirement saving and charitable contributions
  • The estate tax would be eliminated immediately instead of being phased-out gradually
  • The alternative minimum tax would be eliminated
  • The 3.8% net investment income tax implemented as part of the Affordable Care Act would be eliminated
 
Businesses
 
  • The current top business income tax rate would be cut from 35% to 15%. The 15% business tax rate would apply to large corporations, small businesses and pass-through entities.
  • The tax reform plan would impose a one-time tax on repatriated foreign profits – the exact tax rate is unknown at this time
  • The tax proposal would change the tax system to a territorial tax system (whereby only income earned in the U.S. would be subject to U.S. tax).  Currently, U.S. taxpayers are taxed on all income wherever it is earned.
  • The one page document released by the White House states that the tax reform plan would “eliminate tax breaks for special interests.” However, the document does not provide any details on this.
 
Notably, what is missing from the tax reform proposal is the controversial border adjustment tax. “We don’t think it works in its current form, and we’re going to continue to have discussions with GOP lawmakers,” Mnuchin said at an event hosted by The Hill on Wednesday morning. Also, there is no infrastructure spending package contained within the proposal.
 
What Does CohnReznick Think?
 
What’s significant about the proposal is what the outline does not address.  While the proposal outlines the goals of the tax reform and potential changes impacting individual and business taxpayers to achieve those goals, there are no specifics relating to any of the proposed changes.   With any tax change, there are winners and losers and who wins and loses will be based on the legislation ultimately enacted.  Given the current state of affairs in Washington, D.C., it could be some time before more detailed guidance is provided.  
 
Contact
 
For more information, please contact Ken Kanter, Managing Partner – Tax, at 973-364-6668 or kenneth.kanter@cohnreznick.com, or Bob Moss, Principal – National Director of Governmental Affairs, at 617-648-1406 or bob.moss@cohnreznick.com.
 

Any advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues. Nor is it sufficient to avoid tax-related penalties. This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it. 

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