Trump Says He Will Announce New Tax Reform And Tax Reduction Plan On Wednesday

President Trump will unveil plans for tax reform and tax reduction on Wednesday as he pursues his domestic agenda during his first 100 day action plan that remains focused on improving the U.S. economy and creating more jobs.

President Trump tweeted about his upcoming tax reform plans earlier this morning and described them as a big TAX REFORM AND TAX REDUCTION.

After facing resistance with his plan to repeal and replace Obamacare through the American Healthcare Care Act that was shelved on March 24th, President Trump is moving forward to a complicated pathway of tax reform and tax reduction.

Some of the President’s earlier campaign pledges about tax reform includes an ambitious tax overhaul consisting of an economic plan to grow the U.S. economy by 4 percent and create at least 25 million new jobs through massive tax reductions and tax simplifications by offering a large corporate tax cut from 35 percent to 15 percent along with a 10 percent tax repatriation or tax holiday for trillions of corporate dollars that are parked in overseas offshore accounts.

U.S. corporations have $ 2.1 trillion in untaxed profits offshore and aren’t subject to paying income tax on their overseas until they are brought into the United States.

Although U.S. corporations have a 35 corporate tax rate, which is relatively high compared to other developed countries, many corporations have taken advantage of tax loopholes to avoid pay less than the 35 percent tax rate.

Compared to 60 years ago when corporations paid one-third of U.S. federal revenues, they pay just one-tenth of U.S. federal revenues today.

The Congressional Budget Office (CBO) estimates that the effective marginal corporate tax rate, representing the total tax burden relative to income, was 19 percent in the United States in 2012, the fourth highest among the Group of 20 (G20) countries, and approximately 20 percentage points below the top U.S. statutory corporate tax rate.

Argentina, Japan, and the U.K. ranked in the top three among G20 countries.

Estimates of effective corporate tax rates in the CBO’s report show differences among the G20 countries only relate to statutory corporate tax rates and depreciation allowances for buildings and equipment.

According to the Tax Foundation, the United States has the third highest general top marginal corporate income tax rate in the world, at 38.92 percent (consisting of the federal tax rate of 35 percent plus the average tax rate among the states) and falls just behind the United Arab Emirates (55 percent) and Puerto Rico (39 percent).

During his campaign, President Trump’s tax reform plans included offering large middle class tax cuts and a proposal to lower the number of tax brackets from 7 to 3 and simplify tax forms.

The current marginal tax rate for U.S. citizens is based on a graduated model and is applicable to all taxable income, including capital gains.

The taxable rate for U.S. citizens varies from 25 percent for American income levels between 0-$50,000 to a 34 percent tax rate on incomes from $335,000 to $10,000,000.

If President Trump doesn’t want to add to the U.S. federal with his upcoming tax reduction and reform plans which haven’t yet been officially unveiled, he will either need to discover a new way to raise federal revenues to offset the drop in federal revenues by lowering tax rates or else find a way of slashing federal spending in a proportional way.

Raising federal revenues or slashing federal spending will require bi-partisan cooperation on Capitol Hill and won’t be an easy undertaking within the first 100 days of a U.S. presidency.

Currently, entitlement spending represents the largest percentage of U.S. federal spending with Social Security and Medicare followed by defense spending.

President Trump has pledged earlier to not touch Medicare and Social Security although he has new plans to increase defense spending.

Based on analysis from the Office of Management and Budget concerning federal spending in 2016, spending on social security, unemployment, and labor was 37 percent of all outlays that year.

Medicare and general health spending was 28 percent of all outlays in 2016 while national defense spending represented 15 percent.

In terms of federal revenues, income from individual taxes in 2016 is estimated to be 49 percent, payroll tax was 33 percent, and corporate tax receipts were 9 percent.

Written and Edited By:

Johnathan Schweitzer

@SchweitzFinance

schweitz31@gmail.com

 

 

 

 

 

 

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