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When Donald J. Trump issued his original tax plan in September of last year, the then-candidate for the Republican presidential nomination promised that some Americans wouldn’t owe any tax at all.
In a speech Monday before the Detroit Economic Club, the now nominee erased that no-tax option.
Original plan had a 0% rate
Trump’s original proposal called for 4 tax brackets, ranging from 0% to 25%.
“If you are single and earn less than $25,000, or married and jointly earn less than $50,000, you will not owe any income tax,” Trump proclaimed last year. “That removes nearly 75 million households — over 50% — from the income tax rolls.”
His new plan would put some of those folks back on the Internal Revenue Service’s radar.
Fewer brackets, higher tax rates
Trump, apparently in a sign of Republican Party conciliation and economic reality, has revised his tax plan to follow the tax rates and income brackets included in the House Republicans’ tax reform plan.
That proposal, backed by Republican budget guru and current House Speaker Paul Ryan, calls for 3 individual tax rates: 12%, 25% and 33%.
Trump’s 0% tax rate is gone.
Still, the Republican candidate told his packed house at the Detroit event that “many American workers” will find “their tax rate will be zero.” He’s basing this on a proposal for higher standard deduction amounts that was included in a GOP tax reform plan released in June.
“This, in effect, creates a larger 0 percent bracket,” the Republican tax plan says. “As a result, taxpayers who are currently in the 10-percent bracket always will pay lower taxes than under current law.”
Reaching out to parents
Trump has offered another new tax proposal that takes aim at Democratic opponent Hillary Clinton and her lead among women voters.
He wants to allow parents to fully deduct from their taxes the average costs of child care spending.
Clinton has proposed capping child care costs at 10% of a family’s income. The former secretary of state also supports a tax credit of up to $1,200 for adult family members who care for their aging parents.
Deficit question lingers
Trump’s speech to the Motor City gathering dealt with broad tax policy generalizations, as is generally the case for such talks during an election year.
He did promise, though, that “in the coming weeks, we will be offering more detail on all of these policies.”
Those details should tell us whether his new tax plan will be less costly than the nearly $10 trillion estimate that bedeviled his original proposal. Some Trump surrogates have suggested the new figure will be in the $3 trillion deficit range. Bankrate will let you know if that lower deficit amount is correct, as well as what’s in the other new Trump tax-plan specifics as they are announced.
Paul S. Herman CPA, a tax expert for individuals and businesses, is the founder of Herman & Company, CPA’s PC in White Plains, New York. He provides guidance and strategies to improve clients’ financial well-being.