The Trump Administration has released the outline of its proposed tax reform plan on September 27, 2017 titled, “Unified Framework for Fixing Our Broken Tax Code”. The plan seeks to significantly lower tax rates for both businesses and individuals.

The Trump Administration, the House Committee on Ways and Means, and the Senate Committee on Finance have developed the framework to achieve a pro-American, fiscallyresponsible tax reform and have announced the proposed plan which entails a summary of key issues that President Trump’s tax reform seeks to address. Although the proposal is light on detail, the Administration’s four stated goals are clear: (i) make the tax code simple, fair, and easy to understand (ii) give American workers a pay raise by allowing them to keep more of their hardearned paychecks (iii) make America the job magnet of the world by leveling the playing field for American businesses and workers, and (iv) bring back trillions of dollars that are currently kept offshore to reinvest in the American economy.

The proposed tax plan calls for tax rate reductions on both businesses and individuals in order to “[g]row the economy and create millions of jobs, [s]implify our burdensome tax code, [p]rovide tax relief to American families – especially middle-income families; and “[l]ower the business tax rate from one of the highest in the world to one of the lowest.”

The plan’s “Business Reform” would cut the corporate tax rate to 20%, which strays from the initial proposal of 15%, from the current rates of up to 35%, and to eliminate the corporate AMT. The Current Proposal also provides for a reduction in income tax rate applicable to income derived through pass-through entities (e.g., S-corporations, partnerships, and LLCs taxed as partnerships) to 25% instead of the current 39.6%.

The framework also proposes that businesses will be allowed as a current deduction the cost of new investments in depreciable assets, instead of depreciating such assets over its useful life.

More importantly, the current proposal suggests adopting a territorial tax system for multinational companies. If passed, the multinational companies will be exempted from tax on income earned outside of the US. Also, the proposal suggests adopting a one-time low tax rate on earnings trapped overseas to allow the repatriation of trapped cash back to the US with no additional tax.

However, these promising tax rate reductions and their framework propose a limitation on expenses, that will result in an increase in the taxable income by limiting the deduction for interest on the expenses incurred by corporations.

The plan’s “Individual Reform”, suggests that the individual tax rates will be reduced and consolidated into three brackets of 12%, 25%, and 35%. While that may create the perception that the plan would increase taxes on the poor (from the current 10% to 12%) while cutting taxes for the rich, it's possible only the latter of those two perceptions will become reality.

The framework also provides more specific tax benefits such as (i) doubling the standard reduction deductions currently allowed to individual taxpayers from $12,000 to $24,000, (ii) increasing child tax credit, and (iii) the repeal the AMT, which was originally intended to ensure wealthy pay at least some tax, applicable to most taxpayers making between $200,000 and $1 million.

Finally, as continuously advocated by President Trump, the proposal suggests for the repeal of the estate tax (or “Death Tax” as called by the framework) on estates worth more than $5.5 million– which currently affects only about 0.2% of all estates.