Last week in Missouri, Donald Trump finally began to cast his vision for tax reform. Over the past 10 months, we have heard little from the President or Republication leadership on the significant campaign promise of tax reform. During his Missouri speech, Trump laid out his vision in what many consider to be the first step in the potentially long road to tax reform. While there are still few details, here are the key principles that Trump has laid out.
Trump has promised to dramatically reduce the complexities of the tax code. Generally, this means a lower tax rate, but also fewer deductions.
Trump continually comes back to the issue of jobs and has harped on the corporate tax rate as one of the most significant obstacles to creating those jobs. Trump is asking Congress to reduce the corporate tax rate to 15%, an unlikely goal, but one that sends a message to Congress that Trump would like to see tax rates reduced.
Trump’s third goal is to provide tax relief for the middle class. Trump is very vague about what this means and this objective could be one of the more difficult to achieve. Certainly, a simplified tax code is something that both parties could endorse, but an actual reduction of tax rates for the majority of Americans will reduce revenue and increase the federal deficit – something that Republicans in Congress are unlikely to endorse.
Trump has floated the idea of a tax holiday on trillions of dollars that US corporations have parked overseas. It is generally agreed that the US tax code incentivizes US corporations to leave earnings made overseas in foreign accounts rather than repatriating that cash back to the United States. The idea behind this objective is that a change in the US code could bring those trillions home to benefit the US economy.
Clearly, there will be many more conversations, and compromises before the tax code is actually modified. However, these broad objectives begin the conversation in what could be a productive objective of reforming the bloated US tax system. We will keep you informed as the conversation continues.