President-elect Donald Trump put forward a number of tax proposals during his campaign and also made modifications during the campaign to reduce their deficit impact and to more closely conform to congressional Republican proposals.
Here is a summary of his most recent tax proposals and their likelihood of being implemented. The Republican majorities in both houses of Congress should, in general, make it easier for a Republican administration to enact tax legislation.
Individual Tax Cut Proposals
Trump has proposed reducing the individual marginal-rate tax brackets from six rates to three rates: 12, 25, and 33 percent. This is a decrease from the current top rate of 39.6 percent. These rates conform to Republican congressional proposals and, therefore, are likely to survive.
Trump has also proposed to more than double the standard deduction to $15,000 for single individuals and $30,000 for joint filers. He has proposed the elimination of the deduction for personal exemptions and the head-of-household filing status. For some taxpayers, the loss of personal exemptions could cost more in taxes than the gain from the increased standard deduction. Congress may do some revisions to address these issues.
Business Tax Cut Proposals
Trump has proposed a reduction in the top corporate tax rate to 15 percent and to also extend this 15 percent top rate to income from pass-through entities and sole proprietorships. The current top corporate tax rate is 35 percent, and the current top rate on business income from pass-through entities and sole proprietorships is the top ordinary income tax rate of 39.6 percent.
Trump has proposed that some sort of tax, like the tax on corporate dividends, would be applied to distributions of business income from these other entities. The Trump campaign has stated that it would hope to include provisions to prevent the conversion of ordinary income into business income, but there are no details at this point.