This afternoon, Treasury Secretary Steven Mnuchin and National Economic Council Director Gary Cohn announced the principles of the Trump Administration’s proposal for tax reform:
Individual Taxation
- Reducing number of tax brackets from 7 to 3—10 percent, 25 percent, and 35 percent brackets
- Standard deduction increased to $24k for married couples
- Repealing AMT
- Return top capital gains and dividend rate to 20 percent by getting rid of 3.8 percent Obamacare Tax
- Repealing Estate tax
- All personal deductions will be eliminated other than mortgage interest and charitable contribution (that includes deduction for state and local taxes and deduction for healthcare); unclear on investment-related expenses such as investment interest
Business Taxation
- A reduction in the corporate tax rate to 15 percent
- A similar reduction in the effective tax rate for small and medium sized businesses (implying passthroughs) to 15 percent (unclear how this will be structured)
- A one-time repatriation tax on all offshore earnings of U.S. corporations (the exact rate still being negotiated with Congress)
- A switch to a territorial system of international taxation
- No mention of (i) border adjustment, (ii) interest deductibility or capex expensing, or (iii) revenue neutrality
