The so-called one-page tax reform proposal issued by the White House is less a formal tax plan than a series of goals. Even with the Republicans in control of both houses of Congress, getting these passed is going to be an uphill battle, so no one should be panicking—or rejoicing—at this point.
Here are a few of the most significant changes outlined in the White House proposal:
- Reducing the current seven tax brackets to three: 10%, 25% and 35%.
- Doubling the standard deduction.
- Repealing the alternative minimum tax.
- Repealing the estate tax.
- Lowering the business tax to 15%.
It’s obvious there are winners and losers here, based on your current financial situation. However, we don’t recommend changing your tax and financial plans based on this proposal. First of all, even moderate tax reform provisions generally find themselves under extensive Capitol Hill scrutiny, and these proposals are radical.
Second, there are still a lot of unanswered questions. According to The Hill, which covers Washington politics, these are a few of the unknowns that make it impossible to judge the effect of the new tax plan:
- What will be the thresholds for each of the new tax brackets?
- Will businesses be able to take advantage of “full expensing” — that is, immediately deducting the full costs of capital expenses?
- Will some tax breaks be eliminated?
- How will the government make sure that there isn’t misuse of “pass through” entities to unfairly avoid proper taxation?
So what should you do now? Right now, both businesses and individual taxpayers should stay alert, but not make any major plans based on what might happen. This plan may change a dozen times before it’s passed — or it may be scrapped entirely.
If there are aspects of the proposed tax measure that you either agree or disagree with, tell you elected officials. Click this link to find out who your representatives are and how to contact them.
