Trump will have a cooperative GOP house and senate and it is likely that overall tax rates for the wealthy will be heading lower starting in 2017. Therefore, now is the time to begin your tax planning. That means it’s time to put the campaign and the election behind us and start thinking about the future. A Trump presidency means a lot of different things to a lot of different people, but one of the biggest topics throughout the election process was how Trump’s tax plan would affect the country. That has been an ongoing debate and it will surely continue to be a hot topic in the coming weeks and months before he takes control of the Oval Office in January. It’s certainly been a well-covered theme here at GROCO over the past several months. So how will Trump’s tax plan affect the country, especially the wealthy?
Top Earners to See Tax Bracket Drop
It’s true that the president-elect proposed a lot of changes to the country’s tax system. However, it’s also very important to remember that he can’t change the tax code without the help of Congress. So, it remains to be seen how many of his proposals will become law and how many will quietly drift away into the tax-change idea graveyard. However, there are some changes that could likely be made and they will most likely effect the wealthy. Across the board, almost all taxpayers would fall to a lower tax bracket. However, those who are currently in the 28 percent bracket, with income between roughly $225,000 and $231,450, could be bumped up to the 33 percent bracket. The wealthiest taxpayers could see their tax rate dropped from 39.6 percent down to 33 percent as well, which means anyone making $225,000 or more would pay the same income tax rate.
Repeal Key Taxes Affecting the Wealthy
There are other Trump tax proposals that could benefit the wealthy, including repealing the estate tax and the Affordable Care Act (ACA) net investment income tax, which adds a 3.8 percent tax to one’s net investment income. Repealing the estate tax would be beneficial to those who inherit more than $5.45 million, while anyone who makes more than $250,000 annually, or earns much of his or her income from capital gains, would benefit from repealing the ACA tax. However, on the downside, any capital gains exceeding $10 million that are held until death could be taxed. That means taxpayers could not donate appreciated assets to a private charity that they or their relatives created.
Helping Big Business
On the business side of things, Trump’s tax plan should be well received by large corporations, even if many of them aren’t happy he won the election. Trump has proposed reducing the corporate tax rate to 15 percent. He has also said that he wants to impose a one-time 10 percent tax on all foreign earnings that have not been taxed by the U.S. This could be a huge boost to the bottom line of many of the nation’s largest companies, including man of the big name tech companies that call Silicon Valley home. In fact, while any company that does business overseas could benefit, the companies holding the most cash overseas are currently headquartered in Silicon Valley.
Time Will Tell
The Bottom line is the majority of the country’s wealthiest individuals and corporations would likely see their tax numbers reduced if Trump successfully gets his tax proposals pushed through Congress. However, it remains to be seen if the legislative branch on Capitol Hill will fully corporate with the president-elect’s proposals.