NEW ORLEANS – President Donald Trump said he will work with Congress to put his proposed tax reform plan in place this year, with the House Ways and Means Committee expected to push a tax reform bill within the first 100 days of the Trump administration, according to a National Law Review article article by a New Orleans attorney employed by Jones Walker LLP.
Although the final version of the tax reform plan is still underway, speculated highlights include lower tax rates, streamlined tax brackets and forms, and a redesign of the IRS.
Most specifically, President Trump could implement a “compressed rate structure for individuals with a top rate of 33 percent on ordinary income, a 50 percent deduction for investment income, and a corresponding reduction in the availability of various personal credits, deduction and exclusions,” Jones Walker LLP wrote in its article.
Jones Walker LLP said other parts of the tax reform include corporate tax cuts that reflect a 20 percent max rate for corporations, replacement of estate tax repeal with a capital gains death tax and overseas profits of American companies being excluded from U.S. taxes.
While the Senate remains divided, the Trump administration and Congress will have to navigate some roadblocks on their way to tax reform.
“The republicans in D.C. want to lower rates in a revenue neutral way,” Jonathan Katz, partner at Jones Walker LLP, told the Louisiana Record. “That can only be accomplished by broadening the base; for example, eliminating or reducing deductions, tax credits and other tax preferences. With many industries built on these tax preferences, Congress in particular could be facing some unhappy constituents that see their tax preferences going away.”
Jones Walker LLP said that the Senate Finance Committee will likely move at a slower pace.
“The House will likely do its best to negotiate the substance of tax reform behind closed doors to limit the influence of special interests,” Katz said. “Our D.C. insiders speculate that a bill could be released on the House floor and voted on within days of one another. However, the Republican party in the Senate is not as united and their majority is not as significant as in the House.”
Katz said that as reflected by the confirmation of Education Secretary Betsy DeVos, there are Republicans willing to break with their party.
“Even Senate Finance Committee Chairman Hatch recognizes the need to work with his colleagues across the aisle,” Katz said. “That process of ensuring 51 votes in the Senate will almost certainly slow down tax reform.
Katz said that tax reform could take up to two or three years, as speculated by some, but that based on recent dialogue from the White House, tax reform could take shape this spring and jump ahead of the push to repeal the Affordable Care Act.
The new tax legislation will “likely impact every taxpayer in the U.S.,” Katz said, adding that according to President Trump and the Republicans in Congress, “everyone will benefit.”
“Of course, the devil is in the details and we may not truly understand those details until there is no turning back,” Katz said. “That said, it is almost certain that the U.S. business community will reap the largest rewards.”