Details of the Trump Administration Tax Proposal Released Today

Earlier today, Trump administration officials released a document with a set of proposed goals for an overhaul of the federal tax code:

Changes to the Individual Income Tax

• Consolidates the current seven tax brackets into three, with rates on ordinary income of 10 percent, 25 percent, and 35 percent. The administration did not specify the income thresholds to which these brackets would apply.
• Doubles the standard deduction, from $6,350 to $12,700 for single filers, and from $12,700 to $25,400 for married filers.
• Provides “tax relief” to households with child and dependent care expenses, the form of which is not specified.
• Eliminates all itemized deductions, except for the charitable deduction and the mortgage interest deduction.
• Eliminates “targeted tax breaks that mainly benefit the wealthiest taxpayers,” which are not specified.
• Eliminates the Alternative Minimum Tax.
• Eliminates the 3.8 percent Net Investment Income Tax.

Changes to Business Income Taxes

• Reduces the “business tax rate” to 15 percent. This presumably implies that the corporate income tax rate would be reduced from 35 percent to 15 percent, as well as creating a maximum tax rate of 15 percent on pass-through business income.
• Moves to a territorial tax system, which would exempt foreign-source income from U.S. tax.
• Enacts a deemed repatriation, at an unspecified rate, of currently deferred foreign-source income.

Other Changes

• Eliminates the federal estate tax.

All in all, the document does not present many details about the administration’s intentions regarding tax reform; in fact, it is less specific than the tax proposal released by the Trump campaign in September 2016. However, the document does indicate some of the administration’s central priorities for tax reform: large rate cuts for U.S. business income, substantial individual income tax reductions, and the curtailment of certain tax preferences.