Trump Tax Plan Offers Overdue Relief for All Taxpayers
Americans deserve a less antiquated and a simpler tax code, writes attorney Curtis B. Hunter, who supports the first significant tax overhaul in more than 30 years.
November 30, 2017 at 12:57 PM
11 minute read
One of the cornerstones in President Trump's campaign was the promise of overall tax reform and tax cuts for the middle class. The Trump tax reform — a unified effort of the Trump administration, House Ways and Means Committee and Senate Finance Committee — provides a framework of specific revisions to the tax code. It serves as a template for Congress to develop legislation by providing granular detail necessary to effectuate tax cuts. Specific details have been discussed by the House and Senate for weeks, and earlier this month the House passed its version of reform targeting the middle class. Critics, however, continue to erroneously project the tax cuts will benefit only the wealthy.
The top 10 percent of wage earners pay 71 percent of all federal income taxes. The top 1 percent pay almost one-half of the taxes and accounted for more income taxes paid than the bottom 90 percent combined. By contrast, the bottom 50 percent of taxpayers pay approximately 3 percent of all income taxes. Naturally, any significant tax reform would likely benefit the “wealthy” to some degree, although the Trump tax reform targets tax cuts for the middle and lower classes.
Highlights
In addition to simplifying the tax code and reporting requirements, the foundation of Trump reform are:
- Reduce the current seven tax brackets to three — 12 percent, 25 percent and 35 percent — with the potential for an additional top rate (such as the current 39.6 percent) for the highest-income taxpayers.
- Double the standard deduction — $12,000 for individuals and $24,000 for married couples. Most itemized deductions are eliminated, retaining important deductions for home mortgage interest and charitable contributions.
- Significantly increase the child tax credit and the income levels at which the credit begins to phase out.
- Create a maximum tax rate of 25 percent for small and family-owned pass-through entities (i.e., S corporations, limited liability companies). The framework further considers eliminating carried interest to prevent wealthy individuals from re-characterizing income and avoiding the top personal rate.
- Reduce the corporate income tax rate from 35 percent to 20 percent.
- Enable businesses to immediately write off (expense) the cost of new investments in depreciable assets for at least five years.
If reform passes, most taxpayers will recognize an immediate reduction in taxes with the reduced progressive tax rates. Families with annual income of $24,000 or less will pay no taxes. Only 20 percent of taxpayers itemize deductions, so doubling the standard deduction results in immediate reduction in taxes for 80 percent of married taxpayers with income exceeding $24,000. Increasing the child tax credit and the income level for phase out reduces taxes for the middle class, and makes the credit available to more families. As for families owning pass-through entities, the maximum tax rate of 25 percent will reduce taxes for those presently making $153,000 or more in annual income — a significant tax savings for most if not all of these families.
Reducing the corporate tax rate (and expensing assets) will have a profound effect on job creation in the U.S. and will enable companies to pass on tax savings to employees with increased compensation and retirement benefits. More significantly, the tax rate will be competitive with the industrialized world and will incentivize repatriation of U.S. companies that moved overseas to avoid excessive taxes, resulting in a substantial increase in revenue for the federal government that can offset the cost of reform.
Members of both parties in states with high state and local income tax rates have pushed back on eliminating the federal deduction for state and local taxes. States with minimal or no income taxes, however, should not be required to subsidize inefficient high tax states such as New York and California. Eliminating the deduction would primarily impact high net worth taxpayers with income in excess of $1 million.
Tax reform passed by the House was in line with the Trump plan, with some modifications. The bill continues the top income tax rate of 39.6 percent for joint filers with income exceeding $1 million and would allow itemized state and local property tax deductions up to $10,000.
The Senate will vote on it version of a tax reform bill in the coming days, expected to implement most of the Trump plan. The Senate bill will likely include repeal of the individual insurance mandate of Obamacare, a tax measure punishing low- to middle-income taxpayers who cannot afford coverage. Repeal would be an immediate tax cut for the taxpayers targeted by the Trump plan.
If history is any indicator, not only will Trump's tax reform reduce taxes for the middle class but it will stimulate an already growing economy. The two biggest tax reform measures in modern history —under Presidents Kennedy and Reagan — resulted in significant increases in the gross domestic product and doubled tax revenue for the federal government. It is estimated that a 0.5 of a percent increase in GDP would translate to $1.3 trillion in revenue.
The first significant tax reform in over 30 years is long overdue. American taxpayers deserve a less antiquated and complex tax code — and the right to retain a greater percentage of their income.
Curtis B. Hunter is a Coral Gables shareholder at Becker & Poliakoff, where his practice includes complex corporate and tax matters. He may be reached at [email protected]
One of the cornerstones in President Trump's campaign was the promise of overall tax reform and tax cuts for the middle class. The Trump tax reform — a unified effort of the Trump administration, House Ways and Means Committee and Senate Finance Committee — provides a framework of specific revisions to the tax code. It serves as a template for Congress to develop legislation by providing granular detail necessary to effectuate tax cuts. Specific details have been discussed by the House and Senate for weeks, and earlier this month the House passed its version of reform targeting the middle class. Critics, however, continue to erroneously project the tax cuts will benefit only the wealthy.
The top 10 percent of wage earners pay 71 percent of all federal income taxes. The top 1 percent pay almost one-half of the taxes and accounted for more income taxes paid than the bottom 90 percent combined. By contrast, the bottom 50 percent of taxpayers pay approximately 3 percent of all income taxes. Naturally, any significant tax reform would likely benefit the “wealthy” to some degree, although the Trump tax reform targets tax cuts for the middle and lower classes.
Highlights
In addition to simplifying the tax code and reporting requirements, the foundation of Trump reform are:
- Reduce the current seven tax brackets to three — 12 percent, 25 percent and 35 percent — with the potential for an additional top rate (such as the current 39.6 percent) for the highest-income taxpayers.
- Double the standard deduction — $12,000 for individuals and $24,000 for married couples. Most itemized deductions are eliminated, retaining important deductions for home mortgage interest and charitable contributions.
- Significantly increase the child tax credit and the income levels at which the credit begins to phase out.
- Create a maximum tax rate of 25 percent for small and family-owned pass-through entities (i.e., S corporations, limited liability companies). The framework further considers eliminating carried interest to prevent wealthy individuals from re-characterizing income and avoiding the top personal rate.
- Reduce the corporate income tax rate from 35 percent to 20 percent.
- Enable businesses to immediately write off (expense) the cost of new investments in depreciable assets for at least five years.
If reform passes, most taxpayers will recognize an immediate reduction in taxes with the reduced progressive tax rates. Families with annual income of $24,000 or less will pay no taxes. Only 20 percent of taxpayers itemize deductions, so doubling the standard deduction results in immediate reduction in taxes for 80 percent of married taxpayers with income exceeding $24,000. Increasing the child tax credit and the income level for phase out reduces taxes for the middle class, and makes the credit available to more families. As for families owning pass-through entities, the maximum tax rate of 25 percent will reduce taxes for those presently making $153,000 or more in annual income — a significant tax savings for most if not all of these families.
Reducing the corporate tax rate (and expensing assets) will have a profound effect on job creation in the U.S. and will enable companies to pass on tax savings to employees with increased compensation and retirement benefits. More significantly, the tax rate will be competitive with the industrialized world and will incentivize repatriation of U.S. companies that moved overseas to avoid excessive taxes, resulting in a substantial increase in revenue for the federal government that can offset the cost of reform.
Members of both parties in states with high state and local income tax rates have pushed back on eliminating the federal deduction for state and local taxes. States with minimal or no income taxes, however, should not be required to subsidize inefficient high tax states such as
Tax reform passed by the House was in line with the Trump plan, with some modifications. The bill continues the top income tax rate of 39.6 percent for joint filers with income exceeding $1 million and would allow itemized state and local property tax deductions up to $10,000.
The Senate will vote on it version of a tax reform bill in the coming days, expected to implement most of the Trump plan. The Senate bill will likely include repeal of the individual insurance mandate of Obamacare, a tax measure punishing low- to middle-income taxpayers who cannot afford coverage. Repeal would be an immediate tax cut for the taxpayers targeted by the Trump plan.
If history is any indicator, not only will Trump's tax reform reduce taxes for the middle class but it will stimulate an already growing economy. The two biggest tax reform measures in modern history —under Presidents Kennedy and Reagan — resulted in significant increases in the gross domestic product and doubled tax revenue for the federal government. It is estimated that a 0.5 of a percent increase in GDP would translate to $1.3 trillion in revenue.
The first significant tax reform in over 30 years is long overdue. American taxpayers deserve a less antiquated and complex tax code — and the right to retain a greater percentage of their income.
Curtis B. Hunter is a Coral Gables shareholder at
This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.
To view this content, please continue to their sites.
Not a Lexis Subscriber?
Subscribe Now
Not a Bloomberg Law Subscriber?
Subscribe Now
NOT FOR REPRINT
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
You Might Like
View AllThe Canadian Influx: How Migration to Florida Is Shaping the South Florida Real Estate Market
6 minute readReflections: Parenting Lessons From Life as a Sports Attorney
Year-End Tax Planning: How Real Estate Investors Can Leverage Qualified Opportunity Funds
5 minute readTrending Stories
- 1Infant Formula Judge Sanctions Kirkland's Jim Hurst: 'Overtly Crossed the Lines'
- 2Abbott, Mead Johnson Win Defense Verdict Over Preemie Infant Formula
- 3Preparing Your Law Firm for 2025: Smart Ways to Embrace AI & Other Technologies
- 4Greenberg Traurig Initiates String of Suits Following JPMorgan Chase's 'Infinite Money Glitch'
- 5Data-Driven Legal Strategies
Who Got The Work
Michael G. Bongiorno, Andrew Scott Dulberg and Elizabeth E. Driscoll from Wilmer Cutler Pickering Hale and Dorr have stepped in to represent Symbotic Inc., an A.I.-enabled technology platform that focuses on increasing supply chain efficiency, and other defendants in a pending shareholder derivative lawsuit. The case, filed Oct. 2 in Massachusetts District Court by the Brown Law Firm on behalf of Stephen Austen, accuses certain officers and directors of misleading investors in regard to Symbotic's potential for margin growth by failing to disclose that the company was not equipped to timely deploy its systems or manage expenses through project delays. The case, assigned to U.S. District Judge Nathaniel M. Gorton, is 1:24-cv-12522, Austen v. Cohen et al.
Who Got The Work
Edmund Polubinski and Marie Killmond of Davis Polk & Wardwell have entered appearances for data platform software development company MongoDB and other defendants in a pending shareholder derivative lawsuit. The action, filed Oct. 7 in New York Southern District Court by the Brown Law Firm, accuses the company's directors and/or officers of falsely expressing confidence in the company’s restructuring of its sales incentive plan and downplaying the severity of decreases in its upfront commitments. The case is 1:24-cv-07594, Roy v. Ittycheria et al.
Who Got The Work
Amy O. Bruchs and Kurt F. Ellison of Michael Best & Friedrich have entered appearances for Epic Systems Corp. in a pending employment discrimination lawsuit. The suit was filed Sept. 7 in Wisconsin Western District Court by Levine Eisberner LLC and Siri & Glimstad on behalf of a project manager who claims that he was wrongfully terminated after applying for a religious exemption to the defendant's COVID-19 vaccine mandate. The case, assigned to U.S. Magistrate Judge Anita Marie Boor, is 3:24-cv-00630, Secker, Nathan v. Epic Systems Corporation.
Who Got The Work
David X. Sullivan, Thomas J. Finn and Gregory A. Hall from McCarter & English have entered appearances for Sunrun Installation Services in a pending civil rights lawsuit. The complaint was filed Sept. 4 in Connecticut District Court by attorney Robert M. Berke on behalf of former employee George Edward Steins, who was arrested and charged with employing an unregistered home improvement salesperson. The complaint alleges that had Sunrun informed the Connecticut Department of Consumer Protection that the plaintiff's employment had ended in 2017 and that he no longer held Sunrun's home improvement contractor license, he would not have been hit with charges, which were dismissed in May 2024. The case, assigned to U.S. District Judge Jeffrey A. Meyer, is 3:24-cv-01423, Steins v. Sunrun, Inc. et al.
Who Got The Work
Greenberg Traurig shareholder Joshua L. Raskin has entered an appearance for boohoo.com UK Ltd. in a pending patent infringement lawsuit. The suit, filed Sept. 3 in Texas Eastern District Court by Rozier Hardt McDonough on behalf of Alto Dynamics, asserts five patents related to an online shopping platform. The case, assigned to U.S. District Judge Rodney Gilstrap, is 2:24-cv-00719, Alto Dynamics, LLC v. boohoo.com UK Limited.
Featured Firms
Law Offices of Gary Martin Hays & Associates, P.C.
(470) 294-1674
Law Offices of Mark E. Salomone
(857) 444-6468
Smith & Hassler
(713) 739-1250