The White House announced Wednesday a plan to reduce federal income taxes for individuals and businesses alike.
Treasury Secretary Steven T. Mnuchin called it “the biggest tax cut and the largest tax reform in the history of our country,” although the New York Times reports that it remains to be seen whether the proposal merits such superlatives.
Elements of the plan that would impact individual taxpayers include:
- Reducing the number of individual income tax brackets from seven to three, with the tax rates for those brackets being 10 percent, 25 percent and 35 percent.
- Doubling the standard deduction. For example, the deduction would swell to $24,000 for married couples.
- Eliminating most itemized tax deductions, with deductions for mortgage interest and charitable contributions among the exceptions.
- Repealing the estate tax.
- Repealing the alternative minimum tax.
- Ending the 3.8 percent tax on investment income imposed by the Affordable Care Act to help pay for its provisions.
The “centerpiece” of the plan, according to the New York Times, “will be a 15 percent business tax rate, which would apply not only to corporations, but also to small businesses and other large owner-operated conglomerates, such as Mr. Trump’s real estate empire.”
Currently, the top tax rate is 35 percent for corporations and 39.6 percent for small businesses that account for their owners’ personal incomes, according to the Associated Press.
The AP describes the administration’s plan for the tax code as “the most concrete guidance so far on Trump’s vision for spurring job growth.”
How the administration would make up for any resulting loss in federal revenue remains to be seen, according to the AP:
“The White House has yet to spell out how much of a hole the tax cuts could create in the federal budget, maintaining that the resulting economic growth would reduce — if not eliminate — the risk of a soaring deficit.”
In coming weeks, Money Talks News will take a more in-depth look at how these changes might impact your finances.
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