President Donald Trump, in a speech delivered at a manufacturing company in Springfield, Missouri, discussed the need for tax reform and broadly outlined his vision of an “America First” tax system. While generally focusing more on “why” tax reform is necessary and less on specific tax reform measures, the President did reaffirm his desire for a 15% business tax rate. The White House also released an accompanying fact sheet highlighting specific problems with the current tax system, including the burden on individual taxpayers and the anti-competitive effect on American businesses.
The President outlined the following four principles as guiding his tax reform efforts:
- A fair and simple tax Code. President Trump called for “a tax code that is simple, fair, and easy to understand”. He said that the current Code is a “massive source of complexity and frustration for tens of millions of Americans”, and that since the last major rewrite of the Code 31 years ago, rates have increased and special interest loopholes “have crept back into the system”. He stated that most taxpayers need professional help to do their own taxes, which “disadvantages ordinary Americans who don’t have an army of accountants”. According to the fact sheet, taxpayers spend over 6 billion hours annually complying with the tax code, and the typical cost for an accounting firm to complete a Form 1040 income tax return is $176.
- A competitive tax Code. According to President Trump, a competitive tax Code will create jobs and raise wages for Americans. He said that in ’86, when the corporate tax rate was cut to 34%, that rate was below the average rate for developed countries at the time. However, he said that other countries have since cut their rates and reformed their tax systems to be more competitive, to the disadvantage of the U.S. He called for reducing the “business tax rate” down to 15% (from the current top federal corporate rate of 35%), which he says will fuel job creation and raise wages for American workers. He observed that this rate would be “by no means the lowest” but would be highly competitive.
- Tax relief for middle-class families. President Trump said that taxes will be lowered for “middle-income Americans”, allowing taxpayers to “keep more of their hard-earned paychecks” and ultimately spend more money. He said that “[t]his also includes helping parents afford childcare and the cost of raising a family”.
- Repatriation of overseas profits. Finally, the President called for “making it less punitive for companies to bring back” offshore profits (presumably referring to some sort of a repatriation holiday. He said that estimates of the amount of profits parked offshore are between $3 and $5 trillion, and that making it less costly for companies to repatriate these funds will spur new domestic investment.
Opportunity knocks. President Trump said that there is a “once-in-a-generation opportunity to deliver real tax reform for everyday hardworking Americans”.
He called on Congress to “support pro-American tax reform”, saying “[t]hey have to do it. It’s time”.
There were few specific details provided and we await more concrete details in order to begin to analyze and disclose to our clients any actual proposals that are presented.