By SEMA Washington, D.C., Staff
President Trump issued a broad outline for reducing taxes on individuals and businesses that, if enacted, would represent the most sweeping changes to the federal tax code in decades. For companies, the corporate tax rate would be reduced from 35% to 20% by eliminating many current deductions and credits. The plan would create a new 25% tax rate for “pass-through” businesses (sole proprietorships, partnerships and S corporations) that currently pay taxes at the individual rate of their owners. The plan would retain the research and development tax credit, and allow immediate expensing of assets for at least five years. It would also scale back deductibility for corporate interest expenses, move to a territorial tax system and implement a one-time repatriation tax on overseas profits.
For individuals, the plan’s goal is to simplify and potentially reduce taxes by doubling the standard deduction while eliminating many credits and deductions that complicate tax preparation. The standard deduction would jump to $12,000 for individuals and $24,000 for married couples filing jointly. The number of tax brackets would be reduced from seven to three, with tax rates of 12%, 25% and 35%. Congress would have the option of including a fourth rate for high-income taxpayers. Currently, income tax rates range from 10% to 39.6%.
Under the plan, the alternative minimum tax and estate tax would be removed, and state sales taxes would not be deductible. Action now turns to the U.S. Congress for considering the plan and drafting legislation.
For more information, contact Eric Snyder at erics@sema.org.
