On September 27, 2017, the Trump administration released its tax reform plan. The Unified Tax Reform Framework would cut income tax rates, lowering the top rate to 35 percent. It doubles the standard deduction but eliminates personal exemptions. The plan would lower the corporate tax rate from 35 percent to 20 percent. It allows a one-time repatriation of corporate profits earned overseas.
Trump's tax reform plan will boost economic growth.
That's because it gives families and businesses more money to spend. But it would also add $4.2 trillion to the debt. That would slow growth in the long run.
The Tax Reform Framework is based on two previous Trump tax proposals. The first was the "Five-Part Tax Plan" presented during the 2016 presidential campaign. Second was a preliminary tax reform outline released during the president's first 100 days.
Here's a summary of how Trump's tax plan would change income taxes, business taxes and popular deductions for child and elder care.
Income Tax Brackets
Trump's plan would reduce the current seven tax brackets to three. It lowers income tax rates. The top bracket would be taxed 35 percent, down from 39.6 percent. The middle rate would be 25 percent, down from 28 percent. The lowest rate would be 12 percent, down from 15 percent. The plan didn't specify the income ranges for those tax brackets.
The Framework eliminates itemized deductions except for those on mortgage interest and charitable contributions. Trump's earlier plans also retained deductions for retirement savings. This plan asks Congressional committees to simplify retirement benefits to raise participation in workers' retirement plans. Source: "The GOP Tax Plan Has Fewer Tax Brackets And Bigger Deductions, But Is Light On Details," Marketplace, September 27, 2017.) It eliminates the deduction for state and local taxes. That would especially hurt residents in high-tax states like California and New York. Congressional representatives from those states are already protesting this change.
Trump's tax plan doubles the standard deduction for everyone. The deduction for Married and Joint Filers would rise from $12,700 to $24,000.