Summary:
- The framework released today is similar to the outline released in May. While some of the proposals have been modified, most of the items included in this framework are in line with the previous announcements from President Trump.
- The framework is designed to meet four specific goals:
- Make the tax code simpler, fairer and easier to understand
- Provide a tax cut to American workers
- Putting American businesses and workers on a level playing field with those in other countries
- Repatriate the trillions of dollars currently being held by companies overseas for reinvestment here in America
- This is still just a framework, not an actual bill, meaning many of the details are yet to be seen. This framework also encourages Congress and the tax-writing committees to enhance or expand on the items outlined, so it’s reasonable to expect significant changes to what was released today.
- The overall theme for both individual and business taxpayers is a plan to reduce the marginal tax rates in exchange for eliminating many of the deductions and credits currently in place. The framework does not state if the plan is to keep total tax revenue neutral, or to provide an increased (or decreased) amount of revenue to the government.
- Key points for individual taxpayers include:
- A collapse of the current 7 tax brackets down to three – 12%, 25% and 35%. No suggested income levels for each bracket were provided The outline in May had set the lowest rate at 10%, so this is a bit of increase from that plan. However, that increase is expected to be offset by other cuts.
- The framework does suggest that an additional tax rate may apply to the highest-income taxpayers to ensure the tax code maintains its progressivity.
- Among those other cuts – a near doubling of the standard deduction to $24,000 for couples and $12,000 for singles. This matches the May proposal. This is a bit misleading, however, as it comes with an elimination of the current personal exemption and the additional standard deduction for those over age 65 or who are blind.
- The Child Tax Credit will be expanded, although exactly how was not explained.
- Itemized deductions other than mortgage interest and charitable contributions would be eliminated. This matches the May outline.
- The framework would continue to encourage savings for education and retirement by retaining the tax benefits on those, with a plan to make them more efficient and increase participation.
- The Alternative Minimum Tax would be repealed, along with the estate and generation-skipping tax. There was no comment on the gift tax or basis adjustments at death.
