Trump tackles taxes

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President Trump’s new proposal for tax reform is set to provide big tax cuts for individuals although the proposals contains less details than were put forward during the campaign.

Treasury Secretary Steven Mnuchin has offered an insight into the tax reform proposal

With this tax reform proposal set to affect every income bracket, here is what it would look like:

Tax brackets

One major part of this proposed tax reform is reducing the number of tax brackets down from seven to three. Currently, the tax brackets for individuals sit at 10%, 15%, 25%, 28%, 33%, 35% and 39.6%. The new rates would be set at 10%, 25% and 35%. During his campaign, Trump proposed tax brackets at 10%, 20% and 25%, but has now adjusted them in a compromise with House Republicans anxious about loss of revenue.

On Wednesday morning, Treasury Secretary Steven Mnuchin said that this new tax proposal could be “the biggest tax cut and the largest tax reform in the history of this country”. However, despite these claims, it is still unclear how these taxes will be paid for. The administration’s tax plans place a lot of emphasis on tax cuts, but at the same time very few details on how they would be balanced out. As Republicans control Congress, this proposal is expected to be met with many questions and a lot of scepticism from the law-makers. Some GOP aides have suggested that the White House is not constructively contributing to the idea of tax reform.

Lower business rates

The President is keen on slashing the top tax rate for all businesses to 15%, as he proposed during his campaign. This is well below the current top rate of 35%.

Donald Trump speaking at CPAC 2011 in Washington, D.C.

President Trump has been keen on tax reform since the start of his campaign

There will also be a similar reduction to 15% from the 39.6% top rate currently paid by owners and shareholders of so-called pass-through businesses. In a pass-through business, the owners and shareholders will report profits on their personal tax returns.

Tax breaks for childcare costs

A major part of the Trump plan calls for tax relief for childcare costs but tax and childcare policy experts have suggested that these would disproportionately benefit wealthier families. For low and middle income families, tax rates would more than likely rise to 12%, above the current 10% due to Trump’s new proposals to eliminate the “head of household” status.

Overall, although these new tax proposals may look attractive to some, with little detail as to how they will be paid for it is difficult to imagine how the Trump administration will make them a success.