By Gary Wallace, CPA | Tax Partner
Trump Administration and Congressional Republican leaders known as the “Big Six” recently released a nine-page document, titled “unified framework for fixing our broken tax code” referred to as “the framework”. The framework includes goals that aim to lower tax rates for businesses and individuals, eliminate estate tax and individual alternative minimum tax (AMT), increase child tax credit, and international reforms that include a territorial tax system and one-time mandatory repatriation tax.
Highlights of the new framework include:
- Reduce the corporate income tax rate from 35% to 20% with a goal to eliminate the corporate alternative minimum tax (AMT)
- Set the maximum applicable tax rate pass-through businesses at 25% while also looking to implement measures for preventing passthrough businesses from categorizing wage income as business income
- Increase the current $1,000 child tax credit and provide a non-refundable credit of $500 to adult dependents
- Repeal the individual AMT and estate tax
- Reduce the seven individual income tax brackets to three with rates set at 12 percent, 25 percent, and 35 percent with the possibility of a fourth higher bracket
- International reforms that include a tax on accumulated foreign earnings and a shift to a territorial tax system
The tax “Big Six” consists of House Speaker Paul Ryan, Senate Majority Leader Mitch McConnell, Treasury Secretary Steve Mnuchin, National Economic Council Director Gary Cohn, Senate Finance Committee Chairman Orrin Hatch, and House Ways and Means Committee Chairman Kevin Brady.
While this framework proposes details of potential tax changes, there are still many negotiations and structuring of this plan to be done by White House Administration and Congress. For example, the Big Six panel did not address how the proposed tax cuts will be accomplished within Congressional budgets.
Our clients are very interested in what tax reform may look like and whether it may become law. My current advice is to consider the possibilities but do not plan on reform at this time. It is difficult to see bi-partisan support under this framework because of Democrats’ concerns that such reform still favors the wealthy and increases deficits.
The information contained within this article is provided for informational purposes only and is current as of the date published. Online readers are advised not to act upon this information without seeking the service of a professional accountant, as this article is not a substitute for obtaining accounting, tax, or financial advice from a professional accountant.