The majority of the President's tax plan outlined by Treasury Secretary Steve Mnuchin and White House Chief Economic Advisor Gary Cohn was consistent with the plan President Donald Trump proposed during his campaign. For example, President Trump repeatedly promised to repeal the estate tax and alternative minimum tax (AMT). Trump's 15% corporate tax rate was also the same figure he campaigned on.
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However, not everything stayed the same. Here are three differences from the campaign version of Trump's tax plan and the recently released outline that could affect individual taxpayers.
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The tax rates are different
During the presidential campaign, then-candidate Trump indeed proposed to consolidate the seven tax brackets we have now into just three. And to refresh your memory, here are the details of what his proposed tax brackets looked like:
Data source: Trump campaign website, retrieved November 2016 (no longer available).
If you listened closely to the outline of Trump's new tax plan, the three rates have been modified slightly -- 10%, 25%, and 35%. This could be in response to critics who said the plan doesn't do enough to give the middle class a tax break, as it shifts more of the tax responsibility to higher earners.
Whatever the reason, we don't yet know if the income thresholds for each proposed bracket are still the same as Trump's original plan.
Standard deductions are now a bit lower
In his campaign, Trump proposed a $15,000 standard deduction for single taxpayers and $30,000 for married couples filing joint returns.
The recently released plan calls for doubling the current standard deduction, which would translate to $12,700 and $25,400, respectively. Now, this is still more than taxpayers currently get, but keep in mind that Trump's original plan also called for the elimination of the personal exemption, currently $4,050 per person, and we don't know if getting rid of the personal exemption is still a part of the plan.
For most households, the higher standard deductions more than made up for the elimination of the personal exemption in Trump's original plan. Now, that may not be the case.
More deductions will be eliminated than we thought
Trump's tax plan during the campaign was always a bit vague on deductions. However, Trump said that taxpayers would get to keep many of their deductions. At one point, Trump said itemized deductions would be capped at $100,000 for single filers and at $200,000 for joint filers.
The newest version of the plan eliminates all itemized deductions except those for mortgage interest and charitable contributions. When combined with the higher standard deductions, it would mean that few people would have a need to itemize at all.
This could at least partially answer the question of how Trump plans to pay for his tax cuts. During the press conference revealing the new plan, Mnuchin emphasized that one way the tax cuts will be paid for is through the elimination of deductions.
We don't know most of the details
This was not a detailed tax plan. This was a short outline designed to get the ball rolling on tax reform. And as a result, we have few specific details of the plan.
I already mentioned that we don't know the tax bracket income ranges or if the personal exemption will still be eliminated. We also don't know how Trump plans to provide "tax relief for families with child and dependent care expenses" as the memo on the new plan stated, or whether Trump still plans to eliminate the marriage penalty.
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