What Trump’s Tax Plan Proposes and Who Will Benefit Most From It
We’ve told you what to expect from Trump’s tax plan, which was released this Wednesday. Although not very detailed, the plan more or less includes what everyone expected . Here’s a breakdown of who will benefit the most.
Despite the lack of details in the plan , the most important changes should be noted:
- Tax Tiers : The new plan offers three tax tiers instead of seven (10 percent, 25 percent, and 35 percent). But there are no details on what income falls into each of the categories. Currently, the highest tax category is 39 percent, so this rate will be quite significant.
- Alternative Minimum Tax Abolition : As he mentioned in his campaign, Trump wants to abolish AMT. The tax is intended to ensure that the super-rich pay enough taxes (without the AMT, Trump himself would have paid just over 3% on his 2005 tax return ), but it also complicates things for middle-income people .
- Standard deductions and individual deductions : The new plan will double the standard deduction, which is currently $ 6,350 for singles and $ 12,700 for married couples. But to offset this cost, all individual tax deductions will be waived, with the exception of charitable and mortgage deductions (The White House says, despite confusion, this will not affect the $ 401k deduction ).
- Corporate tax : The corporate tax rate will be cut from 35 percent to 15 percent, which is a fairly significant cut.
Overall, it is unlikely that this plan will be adopted, but if the proposed changes confuse you, here is a simplified breakdown of who will benefit the most from the changes.
Large Corporations: The cut in the corporate tax rate is huge. Currently, 15% is the lowest rate for businesses , so this tax cut would significantly lower taxes for almost all businesses that make more than $ 50,000 a year. Of course, the more profitable the business, the more savings. For example, if a business makes more than $ 18 million, it is now taxed at a 35% rate. The new plan will cut that number by more than half, by just 15%.
Individuals in the highest tax categories . Likewise, since the plan proposes to lower the maximum tax rate from 39.6 percent to 35 percent, people in these groups will experience significant savings. In addition, the New York Times notes that high-income people will save even more because the plan wants to get rid of the 3.8% tax that is used to fund the Affordable Care Act. This tax applies to investment income over USD 250,000 (for married couples).
Individuals with more than $ 5.45 million in inheritance: Under the current system, you can transfer up to $ 5.45 million without paying inheritance tax. But anything that exceeds this amount is taxed at a rate of 40%. Trump’s plan proposes to get rid of this completely. Bloomberg summed up some numbers and calculated that Trump’s own property would save more than half a billion dollars , and his net worth was estimated at $ 3 billion.
While the rest of us will see some tax breaks, it’s hard to say to what extent, since the plan does not include any income thresholds for new tax categories. But it is clear that the most significant changes are tax cuts from the top – the richest corporations and individuals.