Tax Reform Pending? Tax Receipts Dive, Debt Soars
President Trump’s new proposal for major tax reform may be the biggest tax cut for individuals since the Reagan Administration. Along with changes to the tax code, it also reduces the current seven brackets in your individual income tax return to three, with rates of 10, 25 and 35 percent.Currently, the seven tax rates range from 10 to 39.6 percent. Until specific levels of income are designated within each rate category, determining whether your taxes will be positively or negatively affected by the proposed changes remains difficult.But some wealthy taxpayers already started planning ahead by deferring their income till next year in hopes of saving money due to lower tax rates. Now this proactive tax planning is taking its toll on the government by reducing adequate tax revenue and leading to increased borrowing, bringing us closer to the legal debt limit of $19.8 trillion.These unexpected consequences may prompt an earlier-than-anticipated vote to raise the debt limit – perhaps even before Congress breaks for the summer.Since tax reform was one of his most resolute campaign promises, President Trump is under immense pressure to work with the House and Senate to pass the improved tax code. His plan to make the economy work better for all Americans includes the following:
- Cut taxes
- Simplify the tax code
- Eliminate tax breaks
- End taxation of S. corporate overseas profits
- Repatriate $2.6 trillion in corporate profits held overseas
Since many aspects are currently in deliberation, exact details of the President’s tax reform plan remain unclear. Now Congressional leaders and the White House hope to present definitive legislation after lawmakers return from their summer recess in August. Until then, some taxpayers will keep deferring income while others simply hope for the best possible outcome…for themselves and the country.For assistance with your individual, nonprofit, or business tax planning, the experienced accountants at Patrick & Robinson CPAs can help. Contact us at Office@CPAsite.com or 904-396-5400.
