by Julie Martin
President Trump on Wednesday unveiled his tax plan, proposing steep reductions in both individual and corporate income tax rates as well as a move to a territorial tax system.
Individual income tax brackets would be reduced to three — 10 percent, 25 percent, and 35 percent, while the corporate tax rate would drop from 35 percent to 15 percent.
The President said he would similarly drop the income tax rate on unincorporated businesses to 15 percent. The 3.8 percent Obamacare surtax on capital gains and dividends would also be repealed.
The White House proposes to switch the US to a territorial tax system after imposing a one-time tax on earnings held abroad and deemed repatriated. Treasury Secretary Steven Mnuchin said that the tax rate on repatriated earnings has not yet been determined. The rate is one of many details that are still being negotiated with House and Senate leaders, he said.
As expected, Trump’s plan did not include the border adjustment tax on imports pushed by House Republicans. The White House signaled it had rejected that plan a few days ago.
“Although we have seen nothing specific, these proposals are a good first step in breaking the log jam of corporate tax reform that both sides of the aisle agree that the US needs,” commented Douglas Stransky, an international tax partner at Sullivan & Worcester.
Stransky said that the US corporate tax rate has been the highest in the world for too long, which has made it difficult for US companies to compete with foreign companies.
Finally, the US is on the threshold of tax reform that will stimulate the economy, create jobs, and help our US companies compete, Stransky said.