United States: President Trump's Tax Plan To Be Revealed Soon – Where Do We Stand Today?

 As Donald Trump settles into his new presidency, it is an appropriate time to revisit tax proposals1 articulated by both President Trump and House Republicans, as well as their potential impact on comprehensive tax reform. Recently, President Trump indicated that a formal tax plan will be released by the administration in the forthcoming weeks. If enacted, the type of changes that are currently being considered would greatly transform the current tax system for both individual and business taxpayers.

This Stroock Special Bulletin provides a general overview of President Trump's preliminary tax proposal ("Preliminary Trump Plan"), and highlights differences from a similar proposal outlined by House Republicans.

Key Elements

Individual Income Tax

With respect to individual income tax rates, the Preliminary Trump Plan mirrors that of the House Republicans. Under both plans, taxpayers would fall into three brackets: 12, 25, and 33 percent. Maximum rates would be applicable to income over $225,000 ($112,500 for single filers). Additionally, both plans aim to place a limit on itemized deductions. The Preliminary Trump Plan would limit claims of itemized deductions to $200,000 ($100,000 for single filers), while House Republicans would eliminate all itemized deductions other than for mortgage interest or charitable contributions. Note that both plans look to increase the standard deduction. Thus, the increase in the standard deduction potentially may lead to a decrease in the number of taxpayers choosing to itemize.

Observation - The elimination of (or limitation on) an itemized deduction for state and local income taxes could have a significant effect on taxpayers residing or working in high-taxed state and local jurisdictions.

Alternative Minimum Tax

President Trump and House Republicans also aim to repeal the alternative minimum tax (AMT). The AMT originally was established to address concerns that the tax law permitted some high income taxpayers to pay minimal or no tax, while taxpayers with less income were paying a higher percentage of their income in tax.2 Although the AMT has evolved throughout the years, the general idea is for taxpayers to calculate their tax liability twice, and then pay the higher of the regular tax calculation or the AMT calculation (with a potential offsetting credit in later years for some or all of the amount paid as AMT). Eliminating the AMT would be in line with President Trump's goal to simplify the tax code.

Observation - Eliminating the AMT will benefit taxpayers in medium income brackets and significantly simplify their tax reporting.

Investment Income

Both plans call for a repeal of the 3.8 percent Affordable Care Act tax on net investment income (NIIT).3 Taxpayers earning an adjusted gross income of more than $250,000 for joint filers ($200,000 for single filers) are subject to NIIT on the lesser of net investment income for the taxable year or the excess of (i) taxpayer's modified AGI over (ii) the threshold amount.4 This additional tax is computed differently in some respects than the regular tax and the AMT, and necessitates three calculations of taxable income.

In addition to eliminating the NIIT, the Preliminary Trump Plan would retain the existing capital gains rate structure with the new individual income tax brackets.5 Thus, taxpayers falling into the highest tax rate bracket of 33 percent would be subject to a maximum rate of 20 percent on long-term capital gains. House Republicans concerned with the issue of double taxation on income from savings and investment believe that the existing capital gains rate structure only "partially mitigates" the problem.6 House Republicans noted that the addition of the NIIT, as well as the Pease limitations on itemized deductions, can push the tax rate on capital gains and dividends to nearly 25 percent.7 For that reason, their plan would reduce the tax imposed on investment income by allowing taxpayers to deduct 50 percent of their net capital gains, dividends, and interest income (note the Preliminary Trump Plan is silent in regards to dividends and interest income). The result of this deduction would be to reduce tax rates to 6, 12.5, and 16.5 percent on such income.

Observation – Maintenance or reduction of tax rates on investment income is likely to facilitate increased investment and trading activity. Additionally, uncertainty as to whether and when these changes may be implemented could significantly affect timing decisions by individuals as to holding or disposing of assets.

Carried Interest

President Trump has called for the elimination of the carried interest tax regime that allows for profits stemming from long-term investments by sponsors of private funds to be taxed at a capital gains rate of 20 percent plus a 3.8 percent NIIT. This tax rate is markedly less than the highest ordinary income tax rate of 43.4 percent (inclusive of NIIT). President Trump has pushed for carried interest to be taxed as ordinary income, emphasizing that carried interest has been "so good for Wall Street investors, and people like [President Trump], but unfair to American workers."8

Although House Republicans have not addressed this subject in their plan, House Ways and Means Committee Chairman Kevin Brady has previously stated that House Republicans would consider whether a change to carried interest should be included in any tax reform package.9

Observation - Close attention will be paid by private fund sponsors and real estate entrepreneurs as to whether carried interest legislation will be adopted and, if so, possible strategies to restructure the investment form of their activities.

Download - President Trump's Tax Plan To Be Revealed Soon – Where Do We Stand Today?


 1 "Tax Reform That Will Make America Great Again," September 14, 2016. See "Fact Sheet: Donald J. Trump's Pro-Growth Economic Policy" available at https://www.donaldjtrump.com/press-releases/fact-sheet-donald-j.-trumps-pro-growth-economic-policy-will-create-25-milli . See also "A Better Way, Our Vision for a Confident America: Tax," June 24, 2016, available at http://abetterway.speaker.gov/_assets/pdf/ABetterWay-Tax-PolicyPaper.pdf .

2 Starczewski, 587-3rd T.M., Noncorporate Alternative Minimum Tax.

3 26 U.S.C § 1411(c)(1). The net investment income tax includes gross income from interest, dividends, annuities, royalties and rent, as well as gains on the disposition of property.

4 Id. at § 1411(a)(1).

5 "Tax Reform That Will Make America Great Again," September 14, 2016.

6 "A Better Way, Our Vision for a Confident America: Tax," June 24, 2016. http://abetterway.speaker.gov/_assets/pdf/ABetterWay-Tax-PolicyPaper.pdf .

7 Note the Pease limitation was aimed at limiting some itemized deductions for high income earners.

8 "An America First Economic Plan: Winning The Global Competition," Aug. 8, 2016, available at https://www.donaldjtrump.com/press-releases/an-america-first-economic-plan-winning-the-global-competition .

9 Bloomberg Politics, "Brady Says Carried Interest Tax Provision Under Study," Nov. 15, 2016, available at https://www.bloomberg.com/politics/trackers/2016-11-15/brady-expect-no-action-on-carried-interest-tax-until-fall-2017 .

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.

In association with
Related Video
Up-coming Events Search
Font Size:
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
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.