The tears have not yet dried for some, and the celebrating is not yet over for others, but let's turn our attention to taxes. With a Republican Congress and a Republican president, some measure of tax relief is a given. What can we expect?
A good place to start is Trump's platform. Here are the key elements:
1. Cut in half the number of individual income tax brackets and bring rates down to 12%, 25% and 33%.
2. Elimination of the 3.8% Obamacare tax.
3. Lower the business tax rate for corporations and small businesses alike to 15%, but with elimination of many deductions.
4. Tax carried interest gains as ordinary income.
5. Retain 20% capital gains rate for noncorporations.
6. Increase the standard deduction for joint filers to $30,000 from $12,600, while eliminating personal exemptions.
7. $200,000 cap for itemized deductions for joint filers.
8. Repeal of the estate tax (what about the gift tax?). No basis step-up at death, except on first $10 million of assets.
9. Elimination of corporate alternative minimum tax.
10. 10% one-time tax on repatriation of corporate profits held offshore.
11. U.S. manufacturers may elect to expense capital investment and lose the deductibility of corporate interest expense.
How much of this will make it into law, and with what changes? What happens with the new Section 2704 regulations? Will the IRS try to push them through before the inauguration? Will it matter, since Trump is proposing eliminating the estate tax? Will the life insurance lobby influence Congress so as to retain the estate tax at some level?
As the expression goes, "may you live in interesting times." Well, that has been true for the last few months, and in the tax world will be true for at least the next few months. By the way, that expression is often attributed as an anonymous Chinese curse - however, others claim it is in fact an American expression (see the discussion here).