New details have surfaced about President Donald Trump’s long-awaited tax overhaul package after the White House released a preliminary proposal on Wednesday highlighting some of its key provisions, which together appear to dramatically simplify income taxes for individuals and households while deeply cutting business taxes.
The biggest takeaway from the proposal for most people will be the administration’s proposed doubling of the standard deduction for individuals and households, bringing the deduction for single filers from $6,300 to $12,600 and for married couples from $12,700 to about $24,000. This means that many more households will be completely exempt from taxation.
Most itemized deductions have been stripped away in the proposal, which spares just charitable giving and mortgage interest deductions. The impact of this move would be greatly mitigated by the higher standard deduction, which the Tax Policy Center last year estimated would cause 38 million households to opt for the standard deduction instead of itemizing.
As only one-third of tax filers currently itemize their deductions, the changes are expected to result in a net decrease in the number of people itemizing as well as in a greatly simplified tax code for families and individuals.
The tax proposal also calls for the number of tax brackets to be slashed from seven to three, with marginal rates at 10 percent, 25 percent, and 35 percent, compared to the current marginal rates starting at 10 percent at maxing out at 39.6 percent.
Meanwhile, the corporate tax rate – which is among the highest in the world and has been blamed for steering American companies to do business in other countries – will drop from 35 percent to 15 percent. So-called “pass-through” businesses, including limited liability companies and partnerships, would also see their taxes cut to 15 percent from its current 39.6 percent rate.
Also on the chopping block are the Alternative Minimum Tax, a complicated provision that is meant to stop high-income households from not paying taxes by exploiting loopholes; the estate tax, dubbed the “death tax” since it targets those who die with an estate worth over $5.49 million; and the Obamacare Investment Tax that was levied on some investment income with the passage of the Affordable Care Act.