The Trump Administration yesterday released a brief outline of its tax reform priorities, calling for what administration officials described as the “biggest tax cut” in U.S. history and a step toward the first major, comprehensive overhaul of the tax code since 1986.
While light on specifics, the outline does propose broad goals for tax reform on both the individual and corporate sides, including:
Individual Tax Reform
- Reducing the number of individual tax brackets from 7 to 3 (10%, 25%, 35%)
- Doubling the standard deduction for individuals and joint filers, thereby reducing the number of people who itemize on their taxes to roughly 5% of all taxpayers
- Eliminating all deductions except the charitable deduction and mortgage interest deduction
- Eliminating the federal estate tax
Corporate Tax Reform
- Reducing the corporate tax rate from 35% to 15%
- Applying the reduced corporate rate to many small business entities
- Imposing a one-time tax on certain investment income held overseas
The Administration said that it is working with House and Senate leaders to further flesh out the details of its tax reform plan, although there is no firm agreement on any specifics at this time. Senate Finance Committee Chairman described the process as “just getting started,” while many Republicans on the House Ways and Means Committee, including Chairman Kevin Brady (R-TX) have signaled that they plan to fight for many of the provisions included in the House tax reform blueprint released last June. The timing of tax reform remains in flux, although discussions are expected to pick up in the coming weeks.
While Independent Sector is encouraged that the charitable deduction was not eliminated in the Administration’s tax reform outline, we are concerned that the expanded standard deduction has the unintended consequence of significantly reducing charitable giving if the charitable deduction is only available to a vastly reduced number of itemizers.
We believe that a non-itemizer, or universal deduction, would be a way to recapture much of that lost giving and potentially expand the incentive to all taxpayers. Learn more at Giving100.org, including how you can help make the case to your policymakers for increasing incentives to give in tax reform.
Jamie Tucker is the director, public policy strategy and operations at Independent Sector.
