United States: Trump Tax Reform Roadmap Released

Last Updated: October 5 2017
Article by John R. Wood

On Wednesday President Trump and congressional Republicans unveiled their long-awaited framework for overhauling the United States tax code. Although much of the content was expected, the proposal is notable because it unifies the Trump administration and congressional Republicans prior tax reform plans and it frames the debate for the coming months. It also marks the starting point of a potentially difficult battle to enact significant tax reform.

The proposal calls for lower tax rates for individuals and corporations, eliminating the federal estate tax and a simplification of the increasingly cumbersome tax and reporting obligations. We have briefly summarized the main points of the framework below.

Individual Tax Reform:

Lower personal tax rates

The proposal would cut the number of income tax brackets from seven (ranging from 10% to 39.6%) down to three, consisting of 12%, 25%, and 35% brackets. A congressional committee would be given the authority to include a higher fourth rate for the highest-earning individuals if they determine that the three bracket approach shifts the tax burden from higher-income to lower-income taxpayers.

While the proposal increases the bottom tax bracket from 10% to 12%, it claims that lower-income taxpayers will pay less tax because of the large increase to the standard deduction which would nearly double from $6,300 to $12,000 for individuals and $12,600 to $24,000 for married taxpayers filing jointly.

Elimination of itemized deductions

Most itemized deductions would be eliminated except for the mortgage interest deduction and the charitable giving deduction. The deduction that historically has had the largest fiscal impact, the deduction for state and local taxes paid, would be eliminated. The non-partisan think tank Tax Policy Center estimates this would increase federal revenue by about $1.3 trillion over 10 years but it would be a significant burden for high-tax states such as New York and California.

Elimination of federal estate tax

In a fulfillment of one of Trump's campaign promises, the federal estate and generation-skipping transfer taxes would be repealed. Under current law, the federal estate tax applies to individual estates over $5.49 million or to married individuals with combined estates over $10.98 million. The generation-skipping transfer tax applies to transfers during life or upon death that skip a generation. Both taxes would be eliminated.

The proposal is silent on the federal gift tax, which applies to transfers made during an individual's life. It is also silent on whether a step-up in basis still will apply to assets passing at death or if heirs would take assets at a "carry-over" basis. Alternative Minimum Tax

The Alternative Minimum Tax would be repealed. Broadly speaking, the "AMT" is a separate tax system that was meant to prevent wealthy taxpayers from significantly reducing their income tax through the use of deductions. AMT income is calculated by taking total taxable income and "adding back" in certain itemized deductions. However, many of those deductions that would have been added back under the AMT would be eliminated under the Trump tax proposal.

Corporate Tax Reform:

Reduced corporate tax rate

The proposal would cut the corporate tax rate from 35% to 20%, eliminating most deductions and credits (other than the research and development credit and the low income housing credit), and eliminating the corporate alternative minimum tax. Businesses will also be allowed to immediately write off the cost of new investments over the next five years.

Reduced tax rate for pass-through entities

Under current law, most pass-through entities (partnerships, S corporations, and disregarded entities such as single member LLCs) do not pay tax at the entity level. Instead, the income flows through, and is taxed, to the underlying owners. The proposal would set the tax rate on business profits for pass-through income at 25%, and it would direct the congressional committees to classify wages versus business profits in the legislation to prevent individuals from avoiding the top personal income tax rate.

International Tax Regime:

The proposal would shift to a "territorial" dividend exemption system for businesses. There would be a new 100% exemption for dividends received by U.S. parents from foreign subsidiaries. In order to transition to the new system, all foreign earnings that have accumulated overseas would be treated as repatriated under the old system. The framework does not specify the rates, but it contemplates a two-tier tax rate, with a higher rate for cash profits and a lower rate for earnings that have been invested in illiquid business assets such as equipment.

Although the proposal would move to a territorial system for businesses, it does not discuss moving to a territorial system for individuals. Currently American citizens and green holders face U.S. tax and reporting obligations whether they reside in the U.S. or in a foreign country.


Congressional Republicans are confident they can complete tax reform by the end of the year. However, the framework is light on details and leaves several major policy decisions to the House Committee on Ways and Means and the Senate Committee on Finance, meaning that many contentious debates over the legislation are yet to come. The Butler Snow Tax team is closely monitoring the situation and has been considering the consequences of various potential tax reform proposals and helping taxpayers to develop planning responses. Please contact us if we can be of assistance.

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.