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One of the biggest issues of the 2016 presidential campaign has been tax reform, and the only thing the candidates seem to agree on is that the current tax system needs to be changed. Both remaining democratic candidates want to raise taxes, especially on the rich, while presumptive Republican nominee Donald wants to lower taxes for most Americans and simplify the tax code. Here are the details of Trump's tax plan, and what it might mean to your tax bill, as well as the country, as a whole.
Trump's tax plan
The goals of Trump's tax plan are to simplify the tax code by eliminating loopholes and unnecessary complexity, and to reduce the effective tax rates for all Americans.
As far as simplicity goes, the plan aims to reduce the tax code from seven rates to four, and wants to drastically cut down on tax paperwork, particularly for lower-income Americans. According to Trump's campaign website, more than 73 million households will pay no income tax whatsoever, and will simply file a one-page form instead of spending time and money on tax preparation.
Trump's tax brackets provide a 0% tax rate for the first $25,000 of income for single filers, and $50,000 for married taxpayers filing jointly.
Data source: www.donaldjtrump.com.
Trump also wants to lower the top corporate tax rate to 15%, and simplify the corporate tax code by eliminating loopholes. He also plans to eliminate the marriage penalty, alternative minimum tax, and the estate tax for individuals.
The mortgage interest and charitable income deductions will remain for all taxpayers, but others will be phased out for higher-income taxpayers. According to the plan, taxpayers in the 10% bracket will keep all or most of their current deductions, while those in the 20% bracket will keep more than half of their current deductions. Taxpayers in the 25% bracket will see most of their deductions eliminated, which is one of Trump's ways of offsetting the lower tax rates.
How could it affect your tax bill?
Obviously, if your income is less than $25,000 (single) or $50,000 (married filing jointly), Trump's plan would make your tax bill $0. For incomes above those levels, it's difficult to say exactly how you would be affected, simply because the details on which deductions would stay and go aren't too detailed at this point.
However, the independent tax policy research organization, The Tax Foundation, confirmed in its analysis that the plan would cut taxes, and lead to higher after-tax income for all income levels. So it's fair to assume that, if Donald Trump is elected president, your tax bill is going to go down.
Cost vs. benefits
There are certainly some benefits to Donald Trump's tax plan that you should be aware of. Aside from the obvious benefit of more money in your pocket, the plan is also expected (by The Tax Foundation) to increase GDP by 11.5%, increase capital investment by 29%, and boost wages by 6.5% over 10 years, as compared to the current growth rates. In contrast, Tax Foundation says that Hillary Clinton's plan would have a negative effect on all three of those categories. And Trump's plan would result in the creation of 5.3 million jobs.
The trade-off is that Trump's plan is expected to add to the deficit -- a lot. Even when accounting for the positive effects of the plan that I mentioned, Trump's plan is still expected to add $10.1 trillion to the deficit over the next 10 years. And although Trump has challenged the accuracy of that number -- even calling his tax plan "revenue neutral" -- I'm inclined to believe the independent source on this matter.
Even so, there's no question that Trump's plan has its pros and cons. You should weigh them all as you decide who to vote for in November.
The article How Would Donald Trump Change Your Taxes? originally appeared on Fool.com.
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