We woke up the morning of Nov. 9, 2016, with the news that Donald Trump will be the 45th president of the United States. Among other things, Trump has promised tax reform. I know we have heard that over and over again from presidents, but this time we have a Republican Congress, so we might finally get tax reform.
Before I get into my commentary, I want to hop onto my soapbox for just a second. Outside of the estate tax, we have an income tax in the United States. If you are wealthy, you don’t necessarily make income. For example, you could have inherited money that is just sitting in an interest-bearing account. The only income tax would be on the interest. If you invested the money in stocks and mutual funds, the only income you would have is dividend income and capital gains income, if investments are sold.
So, to say that the wealthiest Americans would benefit from President-elect Trump’s tax plan is disingenuous. They are already benefiting from the tax code because they are paying a favorable tax on dividends and capital gains.
Now that I am off my soapbox, let’s talk about what Trump’s tax plan would do. First of all, today we have the following seven tax brackets: 10 percent, 15 percent, 25 percent, 28 percent, 33 percent, 35 percent, and 39.6 percent. Our C corporation rates run 15 percent to 35 percent, which are the highest in the world.