A lot has been said by political pundits and economic experts since the release of President Trump’s tax reform plan on April 26. The “plan” was outlined in a one-page list of bullet points, subtitled: “The Biggest Individual and Business Tax Cut in American History.”
In the absence of details, and precise analysis, here is what we do know.
The cornerstone of the plan is a significant reduction of the current corporate tax rate. This departs very little from what then-candidate Trump was espousing on the campaign trail.
President Trump is not known to be big on details; he tends to speak from a very broad view. However, we know that he’s an aggressive businessman when it comes to taxes. Like all successful businessmen, he does whatever is legally permissible to minimize his tax obligations. Many of the points in the document are consistent with President Trump’s desire to reduce the tax burden – not only on corporations, but on the general public.
Generally, the key to accomplishing this involves being able to generate additional revenue to offset the proposed tax cuts.
Cutting Corporate Taxes
The United States currently has the highest corporate tax rate in the world at 35 percent. President Trump’s plan wants to cut that to 15 percent. However, 15 percent may not be feasible. The decreased rate may actually wind up being closer to 21 percent or 22 percent. Even a cut like that could have a significant impact on economic growth.
Certain current economic indicators may indicate strength in the economy. For example, the stock market has been doing well over the past few years. Yet, despite gains in the market, gross domestic product (GDP) has remained sluggish. In fact, the US Commerce Department’s just-released figures show that for 2017, the economy barely grew, expanding at an annual rate of only 0.7 percent.
About Emilio Escandon, CPA, and Juan Del Busto
Emilio Escandon, CPA, is the principal-in-charge of national operations for the Tax and Accounting Department at MBAF. Juan Del Busto serves as Of Counsel at MBAF.