Following the failure of his healthcare reform bill, markets have reacted cautiously to the announcement of President Trump’s tax reform. Described as the biggest tax reform since 1986, the reform is intended to fuel growth in the American economy.
Key Points From The Plan
The proposed revisions to the tax code would reduce the current seven wage brackets to three, with rates of 10%, 25%, and 35%. The proposed rates differ from the rates used in his election campaign and the document highlighting the reforms, which has provoked criticism for being only one page long, doesn’t explain precisely where each wage bracket will fall.
The reforms would see the top wage bracket increased from 33% to 35% while the bottom wage bracket would be reduced to 10% from the originally slated 12%. Under the new reforms, the standard deduction would also be significantly altered.
Gary Cohn, leading Trump’s National Economic Council, said that “We are going to double the standard deduction so a married couple wouldn’t pay any taxes on the first $24,000 income they earn. So in essence, we are creating a zero-tax rate – yes, a zero-tax rate – for the first $24,000 that a couple earns”.
During his campaign, Trump suggested that itemized deductions would be capped at $100,000 for single filers and $200,000 for married couples. However, the new plan doesn’t refer to any caps beyond saying that the administration intends to “eliminate targeted tax breaks that mainly benefit the wealthiest taxpayers”.
Read more: https://www.orbex.com/blog/2017/05/markets-react-cautiously-to-trumps-tax-reform-plan/