Last night President Donald Trump made a speech about his administration’s tax reform plan. He addressed truckers in Pennsylvania. Mr. Trump told the truckers his tax reforms will create American jobs by lowering taxes in several ways.
So, to summarize, our plan goes from eight tax brackets down to four, expands the zero tax bracket greatly, expands the child tax credit, repeals the estate tax and special interest tax breaks, cuts the corporate tax rate from much more and equal to 35% tax and brings it all the way down to 20%, and cuts tax breaks for small businesses to the lowest level in more than eight years.The President also says it will be possible for most Americans to do their taxes on a single sheet of paper.
The particulars of the reform would double the standard deduction so that $12,000 of income for individuals and $24,000 for married couples would be tax-free. It would consolidate the eight existing tax brackets for income to four brackets: zero, 12 percent, 25 percent, and 35 percent. The Child Tax Credit would expand to benefit more middle-income families and eliminate the marriage penalty, although how this will happen isn't outlined. Finally, the reform would create a new $500 tax credit for those caring for an adult dependent.
The President last night also mentioned something not in the official release. It’s unclear if this is related to the Bonus Depreciation tax break, but that’s rather how it sounds.
And that is part of our plan because, companies in order to compete, over the next five-year period in our framework, and within our framework, that you right off 100% of the cost of new equipment in the year you buy it. When have you heard that one? That’s going to be a big one. That’s going to be big.Bonus Depreciation currently allows businesses of all sizes to depreciate 50 percent of the cost of new equipment acquired and put in service during 2017. It also allows the same deduction for some improvement to non-residential real-estate. It is scheduled to phase down to 40 percent in 2018 and 30 percent in 2019. This particular tax break is targeted to large businesses.
Farmers generally use the related Section 179 Deduction which also accounts for the purchase of used equipment and caps the dollar amount rather than using a percentage.
The President's proposal could seek to replace both by combining them into a single deduction which would sunset in five years.