“Big League Play” Advocated by President Trump

With the arrival of pitchers and catchers at spring training camps all across America, President Trump got into the act late last week, offering his own interpretation of “Big League”, by finally turning his attention to Tax Reform and using that term to describe his forthcoming plan.  Unfortunately, details are not available yet, but, they are expected in several weeks.  However, the news is encouraging to those who voted for Mr. Trump, looking for some relief as promised in his agenda.

Currently, no one debates that tax reform is coming. With the Republicans controlling both chambers of Congress and a President who has long had serious tax reform in his sights, the questions turn more to what tax reform as proposed Mr. Trump might look like and how his goals and objectives align with those of the Republicans in Congress.

In January, as Mr. Trump was getting ready to take the oath of office, his transition team unveiled a “Contract with the American Voter”  outlining his 100-day plan to “Make America Great Again,” which included vague plans for a Middle Class Tax Relief and Simplification Act.

On June 24th of 2016, the House Republicans issued their own set of tax reform proposals. Titled “A Better Way”, the House plan was much more of a foundation framework than a detailed plan. Support has been growing for the Republican plan over the last several months and it is clear that most Republicans view now as the time to act on that momentum, aiming to move tax reform forward as soon as reasonably possible.

It is expected that the tax reform proposals emerging this year are likely to borrow from ideas promoted last year on the campaign trail, while others like the border adjustment tax on imports will be based on ideas that Republicans have described in recent weeks.

The timing of any tax reform legislation is expected to be in mid to late spring. However, there are a number of broad gaps between Mr. Trump’s plan and the Republican plan.  It remains to be seen as to how the gap will be bridged and whether the two sides can mutually agree on the content and reach of any new tax legislation.

Clearly the border adjustment tax has garnered much attention and is sure to be a controversial item as the idea has not received a warm welcome on the hill, as many observers think it could lead to a trade war with some of the United State’s biggest trading partners.  It is also expected that there will be challenges from the World Trade Organization, and possible increases in consumer prices for items like food and clothing.

Another priority for Republican lawmakers, as well as the President, is allowing multinational companies to repatriate the profits they have kept offshore in low-tax countries and bring them back to the United States at more favorable tax rates.

On the personal income tax side, Mr. Trump’s plan and the House Republican plan have some significant differences on tax deductions.

During the campaign, Trump proposed a cap of $100,000 on itemized deductions for single taxpayers and $200,000 for joint filers. In contrast, the House Republican plan does not include a dollar limit but instead would propose to eliminate most itemized deductions altogether. The House Republican  plan does retain the deductions for mortgage interest and charitable giving, although those incentives could become less attractive for taxpayers who might prefer the higher standard deduction also envisioned by House Republicans.

House Republicans have long called for the elimination of the AMT, and that might finally happen with the Trump administration and a Republican-controlled Congress, although the ability to deduct state taxes might be a casualty.  Both sides advocate the elimination of the Net Investment Income tax.

Another perennial proposal from Republican lawmakers is eliminating the estate tax, but that too has its complications.  The political fallout from eliminating a tax that currently affects the wealthiest among the nation’s tax base could be sufficient to stop full elimination of the tax and possible lead to some further modifications favoring taxpayers.

We expect to see some detailed proposals before the April 18th deadlines for 2016 income tax returns.  In the meantime, we will be posting periodic updates to keep interested parties informed. For more blog posts on Mr. Trump’s Presidency, click here.

Should you have questions, please contact Bob Grossman or Don Johnston.

 

Bob Grossman

Bob Grossman

Bob, one of the firm’s founding partners, has over 40 years of experience in public accounting. He specializes in tax and valuation issues that affect businesses as well as their stakeholders and owners. Bob has extensive experience working with the Internal Revenue Services and also serves as an expert witness in litigation matters.
Categories
Recent Posts

Subscribe to RSS

Get RSS feed notifications when updates are posted on the GYF Insights blog

Contact us to find out more

By submitting this form, you agree to the terms for our collection and use of your data as set forth in our privacy policy