The administration’s latest tax proposal is short and deliberately vague to allow for negotiations with Congress.
As Ms. Manners, a.k.a. Judith Martin, recommends, “If you can’t be kind, at least be vague.” The Trump administration’s latest tax proposal is both kind to taxpayers and vague. The vagueness is by design, according to Treasury Secretary Steve Mnuchin, to allow the President room to negotiate with Congress.
The proposal, with just over 100 words, displayed a remarkable economy of verbiage, yet it promises significant changes. Readers of this blog may be most interested in these three key features:
- A 15 percent “business” tax rate that’s presumably applicable to all entities – corporations, partnerships, S corps, and individuals – earning business income.
- A territorial tax system that would exempt income earned abroad from further U.S. taxation
- A one-time tax on earnings that have been deferred from tax in the United States — with no mention of the applicable rate.
The most commonly voiced concern with the proposed changes relates to the substantial decrease in governmental revenues. Even proponents concede the proposal will increase the U.S. budget deficit in the short term. There are also concerns the changes will disproportionately benefit the wealthy.
Given the paucity of details at this point, and the inevitable controversy, the timeline for passage will almost certainly move from this summer to end-of-the-year (at the earliest). We’ll keep you informed as the tale unfolds. This fall may bring us front-row seats to some great adventures in tax legislating.
For a slightly more comprehensive look at the tax reform outline, view our summary of the plan >>