Getting rid of loopholes and special preferences will help make the economy more efficient and take away the incentive to make decisions purely for the tax benefits.
Advertisement
Yet the proposal so far remains short of vital details, including how it would be paid for. This filing status provides a lower tax rate and a higher standard deduction than filing as a single person. Despite this, corporations have pushed for a tax rate cut for many years, and Trump has obliged.
In what would be a big break for corporate America, President Donald Trump has proposed slashing the US tax rate on corporate and pass-through business profits to 15 percent from 35 percent or more, while also offering tax cuts to average Americans in a rough outline of his tax policy goals.
In 2005, Trump himself paid $36.5 million in taxes, mostly because of the AMT. Treasury Secretary Steven Mnuchin has asserted a few times that the tax plan will pay for itself by generating a lot of growth because the proposed changes will spur investment and create jobs. It is perhaps the most complicated and uncompetitive business rate in the world. Those owners are sole proprietors, partners or shareholders in what are called S corporations, or pass-through entities, which under the tax laws are meant to be small or mid-sized companies.
Trump, a billionaire, owns a global real estate, marketing and property management company, which at the start of his presidency he placed in a trust that he can revoke at any time.
For now, Moody’s is operating as much in the dark as anyone, given the lack of detail the government has so far provided.
Moreover, it is simply false to say, as Treasury Secretary Steve Mnuchin does, that the tax cut will “pay for itself”. “There’s not enough specificity”. It’s unclear which incomes these rates apply to.
Throughout the month of May, the Trump administration will hold listening sessions with stakeholders to receive their input and will continue working with the House and Senate to develop the details of a plan that can pass both chambers. The standard deduction for a married couple is $12,700, so double would be $25,400. This is another tax cut for only the rich (like his health-care bill) that offers no immediate benefits for lower- and middle-income Americans.
Doing so, in turn, could make the economy more efficient and accelerate growth and hiring.
But what about economic growth?
“The difference between 1.6 percent, 1.8 percent GDP and three percent is staggering”, Mnuchin said. That rate rises to almost 39% if taxes levied at the state level are included. Speculative-grade issuers pay less because they have higher leverage and under current rules, are allowed to deduct interest expense for tax purposes.
Trump also wants to reduce the top income tax rate from 39.6 percent to 35 percent.
“It would tremendously help high earners”, says Brian Thompson, a certified public accountant in Chicago.
Cohn said at the briefing that one deduction on Trump’s chopping block is for state and local tax payments, which is estimated to cost the U.S. Treasury $96 billion this year.
Energy major Santos fell as much 5.5 percent after the conservative government proposed a radical plan to restrict exports of liquefied natural gas (LNG) when required. Growth would need to accelerate to 2.8 percent a year, from its current pace of about 2 percent, to pay just for that cut.
Advertisement
Many people, particularly wealthy Americans, could set up companies and reclassify their paychecks as “business income” and have it taxed at 15 percent, experts say. Unlike corporations, the profits of “pass-through” businesses flow directly onto their owners’ tax returns.
