http://www.businessinsider.com/trump-tax-plan-details-corporate-rate-individual-brackets-deductions-cuts-2017-9The article is an easy read, but I'll break it down more simplified below for you all. What do you all think? My personal commentary is at the bottom.
Business Tax Changes:- Corporate tax rate goes from 35% to 20%
- Business owners pay 25% for profits instead of individual tax rate (which often is in the 30-40% range)
- Eliminates many business deductions/loopholes
- 1 time repatriation tax - Likely a ~10% tax for companies to bring their cash from overseas back to the US. It's the "something is better than nothing" tax on big American companies.
Personal Tax Changes:- 12% tax rate for those who were paying 10% or 15% before
- 25% tax rate (unspecified, but it should be people currently paying between 25% and 28%, possibly some 33%'ers will qualify. That'd be single filers from $38k-191k, possibly lumping in some 200-300k earners)
- 35% tax rate for those who were paying 39.6% before.
- Possible, not set in stone, but they're saying they may set a higher tax rate for the uber-rich, which I think makes sense. Currently the 39.6% top rate is for $415k+ earners. I assume they might make a 40% tax rate for those making $1m+ or $2m+ and put those sub $1m at 35%. I think you might see them set it around 42% for the $5m+ range to offset the drop of the 28% and 33% tax rate people to 25%. That kinda makes sense to me, I'm good with that.
- Standard deduction raised to compensate the previous 10% tax rate people now being put in the 12% bracket. Previously $6350 and $12700 for single/joint respectively, now will be $12k/24k respectively.
- Most itemized deductions are nixed with the exception of charitable donations and mortgage interest (thank fucking god. no reason to fuck over homeowners)
- Increase child tax credit - This one I don't really understand or support. Makes the first $1000 refundable and increase the income level at which the credit would phase out.
- Eliminate state and local tax deduction (SALT tax deduction). This means you can no longer write off your state/local taxes dollars from your federal return. This is a win for democrats since most who take this deduction are rich people in NY/CA/NJ.
- Eliminate estate tax below $5.5m - Meaning, unless your net worth is $5.5m+, it doesn't affect you. However, if you're worth say, $7m, you'd be taxed on $1.5m of your $7m, hence the $5.5m+ rule.
Overall, this is a big win for republicans and a loss for Keynesians because it supports supply side economics by reducing tax on corporations. However, for you personally, it's better in pretty much every way regardless of your situation from a personal standpoint because if you're super poor, you pay 2% more, but get back more in standard deduction so you win. If you're middle income you're at worst a 25% tax that stays at a 25% tax, but if you're at 28% or 33%, you will likely now pay 25%. If you're rich, you'll go from 39.6% to 35% and you win. If you're mega rich, you might win big or you might lose. If you make say $10m/year, you might save 4.6%/year, but if Trump actually can implement a 40%+ tax on the "super-rich" (which he should), you might get a little fucked if you're in that category. It's a win for small business owners as well because it sucks to have to pay 39.6% on your business profits as if you're an individual instead of paying the corporate tax rate. Reducing to 25% will be a big help in encouraging people to start their own businesses I think.
If anyone wants more details or previous tax code info, how it will affect you, etc. You're welcome to PM me. This area is my forte and I think I've proven myself to be pretty independent thinking here when it comes to finance/taxes aside from thinking there are too many welfare leeches.
Happy to help
Big question is the tradeoff between the loopholes closed and the decrease in corporate tax rate. Trump, being a businessman, might actually know which ones to close (or whom to ask with regards to which to close), or he might just be doing lip service to closing loopholes, while leaving all of the ones he plans on using open. If he really does a good job at hacking out loopholes, corporate tax rates will probably increase for the super large corporations.