He would significantly raise the standard income tax deduction from $6,300 for an individual and $12,600 for married couples. Exactly how much has not been released, but in his campaign Trump suggested $15,000 for an individual and $30,000 for families.
He would also cut the corporate tax rate from 35% to 15%. Other breaks are also in the works.
This would be a huge tax cut for both individuals and businesses. Most of us would love that. The problem is, what would it do to the federal deficit?
UPDATE: We now have more details about Trump’s proposed tax plan. Go here. Briefly, the standard deduction would double, the seven brackets will go down to three (10%, 25%, 35%), the estate tax and the alternative minimum tax will go away. But tax deductions will end except for mortgages, retirement savings, and charitable giving.
President Trump on Wednesday plans to call for a significant increase in the standard deduction people can claim on their tax returns, potentially putting thousands of dollars each year into the pockets of tens of millions of Americans, according to two people briefed on the plan. . . .
Trump will call for a sharp reduction in the corporate tax rate, from 35 percent to 15 percent. He will also propose lowering the tax rate for millions of small businesses that now file their tax returns under the individual tax code, two people familiar with the plan said.
These companies, often referred to as “pass throughs” or S corporations, would be subject to the 15 percent rate proposed for corporations. Many pass throughs are small, family-owned businesses. But they can also be large — such as parts of Trump’s own real estate empire or law firms with partners who earn more than a million dollars annually. The White House is expected to pursue safeguards to ensure that companies like law firms can’t take advantage of this new tax rate and allow their highly paid partners to pay much lower tax bills. . . .
The existing standard deduction Americans can claim is $6,300 for individuals and $12,600 for married couples filing jointly. The precise level of Trump’s new proposal could not be ascertained, but it was significantly higher, the two people said, who spoke on the condition of anonymity because the plan has not yet been made public.
During the campaign, Trump proposed raising the standard deduction to $15,000 for individuals and $30,000 for families.
Like other parts of Trump’s tax proposal, an increase in the standard deduction would lead to a large loss of government revenue.
Illustration by 401K2012, Flickr, Creative Commons License, Public Domain