Trump’s tax plan is finally here.
Well, sort of.
On Wednesday, the President and the “Big Six” group of Republican tax strategists introduced the latest iteration of their plan to overhaul the American tax system .
The nine-page tax reform proposal is longer than the bullet points we got in April – but many important details are still missing.
One tax reform theme has been consistent since the days of Candidate Trump : The federal income tax brackets could be simplified from the seven we have today.
President Trump’s current proposal suggests three federal income tax brackets: 12%, 25%, and 35%. What we don’t know, however, is which incomes will fall into each tax bracket.
The chart below shows what we do know so far about how Trump’s tax plan could change federal income tax brackets, compared to what we have today. Click the “joint filers” button to see adjusted numbers for joint filing status.
There may be one more tax bracket, according to the plan :
“An additional top rate may apply to the highest-income taxpayers to ensure that the reformed tax code is at least as progressive as the existing tax code and does not shift the tax burden from high-income to lower- and middle-income taxpayers.”
As it stands now, it’s impossible to calculate exactly how Americans’ tax bills could change as a result of tax reform.
Most tax deductions would be eliminated under the plan, except for the mortgage interest rate deduction and the charitable deduction. The personal exemption would also be removed, but the standard deduction would be increased.
That’s a detail that some see as a selling point for the tax plan, indicating that it will result in a tax cut even for those in the lowest-income brackets. But that logic may be faulty, as Business Insider’s Josh Barro pointed out . The larger standard deduction works out to be about the same – or possibly worse – for many Americans.
After multiple failed attempts to repeal and replace Obamacare , tax reform could take center stage. Or, it could face the same fate . Only time will tell.
“We have to acknowledge that any effort to cut or reform taxes is inevitably more complicated than tackling health care,” said Mark Hamrick, senior economic analyst at Bankrate.com, in an email. “Health care involves around one-sixth of the U.S. economy, while taxes covers pretty much everything. That makes the broader fight even larger and more complicated.”
Trump’s tax reform team – which includes House speaker Paul Ryan, Senate majority leader Mitch McConnell, National Economic Council director Gary Cohn, Treasury secretary Steven Mnuchin, Senate Finance Committee chairman Orrin Hatch, and House Ways and Means Committee chairman Kevin Brady – has its work cut out.