Even though Trump has many haters all around the world, many Americans are quite happy with the president right now – mainly due to his announcement that he wishes to cut taxes dramatically for both businesses and individuals. Want to know more about the Trump tax proposal? Read our information below to find out!
Lowering Individual Income Taxes
Trump proposes to reduce the number of tax brackets to three, opposed to the seven currently used. The new brackets would be 10%, 25% and 35%; this means that the highest tack bracket of 39.6% would be eliminated.
Still, this is a different tax rate than Trump proposed in his original campaign, where he promised to implement rates of 10%, 20% and 25%.
Lowering Business Rates
Trump also proposed to reduce the top tax rate for all businesses down to 15%; this is what he promised during his presidency campaign too. The highest rate businesses pay today is 35%, although businesses pay less in reality due to various tax breaks applying to them.
Single Tax on Overseas Profits
Taxes also apply to multinationals operating overseas. Trump is proposing to lower those taxes too and implement a low one-time tax; this on a total of $2.6 trillion in profits made abroad.
The Territorial Tax System
Trump has also proposed to switch to a territorial tax system; this means that taxes may vary on the area where the profits are earned. The territorial tax system was proposed earlier by the republicans, a stance Trump now seems to support.
If the territorial tax system becomes active in the U.S., it would mean that companies in the U.S. only have to pay U.S. tax on the profits they have earned to the U.S. However, this could have an impact on U.S. businesses and motivate them to start producing abroad more. Could this mean a job loss for Americans?
Missing Border Adjustment Tax
The controversial border adjustment tax was proposed by the republicans a while back, but it does not seem that Trump is backing this proposal. According to an interview with Mnuchin, the general stance is that border adjustment tax would not work in its current form.
Tax Breaks for Child Care
Since child care can cost an incredible amount of working parents, Trump proposes a tax break for child care. However, he hasn’t gone in much detail about the subject.
During his campaign, Trump did mention a possible tax break for child care, which could help families with child care cost. He proposed letting parents deduct the average cost of child care in their state, or a tax break for parents who set aside a certain amount of money for child care and elder care. Which one of these plans Trump has in mind is not yet clear.
Even though taxes are going down somewhat – mainly to the benefit of businesses – Trump wants to eliminate deductions too. The only deductions he wishes to maintain is mortgage interest and charitable contributions.
Trump also wishes to eliminate certain taxes all together; this includes Alternative Minimum Tax, Estate Tax and Medicare Surtax.
While most tax reductions are interesting, there is not a big difference for individuals where income tax is concerned. However, taxes are becoming simpler and more straightforward with this plan.