United States: 2016 Post Election Tax Law Update

Last Updated: November 21 2016
Article by Michael G. Goller

The recent presidential election increased the likelihood of a significant change in the tax law.  During the campaign, President‑elect Donald Trump outlined a number of tax proposals.  Also, it is possible that during the remaining "Lame Duck" session, Congress may make some tax law changes before President Obama leaves office.  Below we highlight some of these proposals and possible changes.

Campaign Proposals

During the campaign,  Trump proposed reducing the number of individual income tax rates; lowering the individual income tax rates for most taxpayers; lowering the corporate tax rate; and repealing the Affordable Care Act ("ACA") (including, presumably, the ACA's tax‑related provisions).  In his campaign materials, Trump highlighted several goals of tax reform:

  • tax relief for middle class Americans;
  • simplify the Tax Code;
  • grow the American economy; and
  • do not increase the budget deficit.

Trump also identified during the campaign a number of tax‑related proposals that he intends to pursue during his first 100 days in office.

  • The Middle Class Tax Relief and Simplification Act. According to Trump, the legislation would provide middle class families with two children a 35% tax cut and lower the "business tax rate" from 35% to 15%.
  • Affordable Childcare and Eldercare Act. A proposal described by Trump during the campaign that would allow individuals to deduct childcare and elder care from their taxes, incentivize employers to provide on‑site childcare, and create tax‑free savings accounts for children and elderly dependents.
  • Repeal and Replace the ACA. During the campaign, Trump promised to fully repeal the ACA.  Recent comments by Trump suggest that some provisions of the ACA may survive (g., preventing the denial of insurance coverage for those with a preexisting condition and allowing children to remain on their parents' health plan until age 26).

Individual Income Taxes

The last change to the individual income tax rates was in the American Taxpayer Relief Act of 2012 ("ATRA"), which raised the top individual income tax rate.  Under ATRA, the current individual income tax rates are 10%, 15%, 25%, 28%, 33%, 35%, and 39.6%.  During the campaign, Trump proposed a new rate structure of 12%, 25% and 33%:

  • Current rates of 10% and 15% would be 12% under new rate structure.
  • Current rates of 25% and 28% would be 25% under new rate structure.
  • Current rates of 33%, 35% and 39.6% would be 33% under new rate structure.

This rate structure mirrors one proposed by House Republicans earlier this year.  During the campaign, Trump did not detail the precise income levels within which each bracket percentage would fall.  Rather, he generally estimated that for joint returns there would be a 12% rate on income up to $75,000; a 25% rate for income between $75,000 and $225,000; and 33% on income more than $225,000 (brackets for single filers will be half those dollar amounts) and "low‑income Americans" would have a 0% rate.

Closely‑related to the individual income tax rates are the capital gains and dividend tax rates.  The current capital gains rate structure, imposed based upon income tax brackets, would presumably be realigned to fit within Trump's proposed percent income tax bracket levels.

AMT

Trump proposed during the campaign to repeal the alternative minimum tax ("AMT").  The last time that Congress visited the AMT, lawmakers voted to retain the tax but to provide for inflation‑adjusted exemption amounts.

Business Tax Proposals

During the campaign, Trump highlighted small businesses, the corporate tax rate and some international proposals.

For small businesses, Trump has proposed a doubling of the Code section 179 small business expensing election to $1 million.  Trump has also proposed the immediate deduction of all new investments in a business.

The current corporate tax rate is 35%.  Trump has proposed a reduction in the corporate tax rate to 15%.  He also proposed sharing that rate with owners of "pass through" entities (sole proprietorships, partnerships and S corporations), but only for profits that are put back into the business.

Based on campaign materials, a one‑time reduced rate would also be available to encourage companies to repatriate earnings of foreign subsidiaries that are held offshore.  Many more details about these corporate and international tax proposals are expected.

Estate and Gift Tax

During the campaign, Trump proposed to repeal the federal estate and gift tax.  The unified federal estate and gift tax currently starts for estates valued at $5.49 million for 2017 (essentially $10.98 million for married individuals); Trump, however, also proposed a "carryover basis" rule for inherited stock and other assets from estates of more than $10 million.  This additional proposal has already been criticized by some Republican members of Congress, while some Democrats have raised repeal of the federal estate tax as a nonstarter.

Other Proposed Changes

Other proposals made by Trump during the campaign would limit itemized deductions, eliminate the head‑of‑household filing status and eliminate all personal exemptions.  Trump also has called for increasing the standard deduction.  Under Trump's plan, the standard deduction would increase to $15,000 for single individuals and $30,000 for married couples filing jointly.  In contrast, the 2017 standard deduction amounts under current law are $6,350 and $12,700, respectively, as adjusted for inflation

Possible new family‑oriented tax breaks were discussed by Trump during the campaign.  These include the creation of dependent care savings accounts, changes to earned income tax credit, and enhanced deductions for child care and eldercare.

The ACA

The ACA created a number of new taxes that impact individuals and businesses.  These taxes range from an excise tax on medical devices to taxes on high‑dollar health insurance plans.  The ACA also created the net investment income ("NII") tax and the Additional Medicare Tax, both of which generally impact higher income taxpayers.  The ACA also made significant changes to the medical expense deduction and other rules that affect individuals.  For individuals and employers, the ACA created new mandates to carry or offer insurance, or otherwise pay a penalty.

Trump made repeal of the ACA one of the centerpieces of his campaign.  During the campaign, Trump said he would call a special session of Congress to repeal the ACA.  Lawmakers could vote to repeal the entire ACA or just parts of the law.

Year‑End Issues

Congress is meeting for a "Lame Duck" session during which it is expected to take up tax legislation.  Exactly what tax legislation Congress will consider before year end remains to be seen.  Possible "hot" issues include the following:

  • Legislation to renew some expiring tax extenders, especially energy extenders.
  • Legislation to fund the federal government, including the IRS, through the end of the 2017 fiscal year.
  • Legislation to enhance retirement savings for individuals.

Conclusion

The information available now about Trump's tax proposals is based largely on statements by him during the campaign and campaign materials.  Trump will take office January 20, 2017.  Between now and then, more details about his tax proposals may become available.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Michael G. Goller
Similar Articles
Relevancy Powered by MondaqAI
Butler Snow LLP
Shearman & Sterling LLP
Butler Snow LLP
Morrison & Foerster LLP
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Butler Snow LLP
Shearman & Sterling LLP
Butler Snow LLP
Morrison & Foerster LLP
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions