President-elect Trump will take office on January 20, 2017. What can we expect? Much is unknown as to what President-elect Trump will really do regarding taxes. Never has a candidate been so vague and contradictory regarding positions.
We do know there will be a Republican majority of 239-193 Democrats. The Senate has a narrower Republican majority of 51 to 48 Democrats (including 2 independents caucusing with the Democrats). One seat remains undecided. However, it takes 60 votes to override a filibuster in the Senate.
President-elect Trump has stated he would do away with the current transfer tax system:
- He would eliminate the estate tax entirely.
- He would eliminate the gift tax entirely.
- Presumably, he would eliminate the GST tax entirely.
- He would disallow a step-up in basis for the assets of decedents with estates over $10 million.
However, we don’t know if this will be a high priority or whether Democrats would filibuster such changes.
Next, income taxes. President-elect Trump’s tax proposals are not entirely clear and have changed more than once. However, he has proposed the following:
- Cap deductions at $100,000 for individuals and $200,000 for a married couple filing jointly.
- Increase the standard deduction to $15,000 for individuals and $30,000 for married filing jointly.
- Reduce the federal tax brackets from 7 to 3, with rates of 12%, 25%, and 33%.
Current estimates are that Trump’s tax plan would:
- Reduce taxes for low income earners by an average of 1.2%.
- Reduce taxes for highest income earners by 10.2%.
According to a piece in Fortune, Trump’s plan would add $5.3 trillion to the federal deficit over 10 years.
Again, we don’t know whether this would be a top priority or whether Democrats would filibuster such changes.
President-elect Trump has called for a repeal of Obamacare. Obamacare included a 3.8% surtax on net investment income. Since the election he has said that he would retain the provision in Obamacare preventing insurers from discriminating against those with pre-existing conditions. However, it is unclear how this might be accomplished.
President-elect Trump has also called for a $1 trillion 10-year infrastructure rebuilding plan. It is uncertain whether Congress would go along with the tax cuts and spending increases being requested by the President-elect. Many in Congress have a record of opposing deficits.
We will have to wait to see how things shake out.
Stephen C. Hartnett, J.D., LL.M.
Associate Director of Education
American Academy of Estate Planning Attorneys, Inc.
9444 Balboa Avenue, Suite 300
San Diego, California 92123
Phone: (800) 846-1555