President Trump on Monday reiterated his promise to slash the tax rate for individuals, and for American businesses: “We are going to be cutting taxes massively for both the middle class and for companies,” he said from his chair in the Roosevelt Room at the White House./
Trump’s proposed tax reform vision is to give tax cuts to working families and to companies to encourage job and wage growth. It involves making tax brackets simpler. Trump’s tax plan involves collapsing the current seven-tier bracket system into just three brackets; those who make less than $75,000 would pay 12%, Americans with earnings between $75,000-$225,000 would pay 25% and workers with incomes of more than $225,000 would pay 33%. Under these reforms, taxpayers making between $48,652 and $88,148 annually would save between $1,174 and $7,052, according to the Tax Foundation.
In an interview with Fox Business News Chris Edwards, director of tax policy at the Cato Institute stated “The benefits of tax reform for the average family won’t be just the tax reduction, but also the higher wages and incomes stemming from greater business investment and hiring. The Tax Foundation found that the Trump plan would raise U.S. wages by about 6%. So for workers earning $50,000 a year, that would be a substantial $3,000 annual wage boost,”
Trump also wants to slash the corporate tax rate to 15%, from the current federal rate of 35%. Though this seems like an outright win for the American economy, there are some drawbacks. “As part of lowering the rate, in the House plan and certain areas of the Trump plan, there’s elimination of significant deductions and credits that companies currently have,” Jeff LeSage, Vice Chairman of Tax at KPMG LLP, told FOXBusiness.com.
Most of this tax reform news sounds good, Yet I caution you to remember there is a difference in what a president says he will do, and what gets reformed and written into law. One this is for sure, the tax landscape will more than likely change.