Donald Trump tax plan - Bold ofcourse... & shades of India's DTC?
I am quite sure that not many of our readers would be interested in the US Presidential elections (due in Nov 2016 ), campaiging for which is already under way. Nevertheless, am equally confident that many readers would have surely heard of the man who has shaken up the political establishment in the United States and has left behind many of his fellow candidates in the Rupublican primary.. we are talking of none other than the real estate mogul cum TV celebrity and now the front-runner for Republican primary if one were to go by the polls: Donald J. Trump.
Trump's policy proposals on immigration have evoked sharp reactions from the Democrats.. but in this post, we shall talk of his quite radical tax plan that he announced an hour ago. Here is the link - https://www.donaldjtrump.com/positions/tax-reform. Addressing a press conference, Mr. Trump laid before the voters a tax agenda that seeks to tick the following boxes:
1. Significantly lower taxes for middle class and no tax for single filers earning less than $25,000 and married filers earning less than $50,000.
2. In his own words, " a simpler tax code with four brackets – 0%, 10%, 20% and 25% – instead of the current seven."
3. Drastic reduction in corporate tax rate from the existing 35-40% to 15%, both for big corporations as well as small businesses. Logic : Corporate Inversions will be made reduntant with lower rates!
4. Incentivizing US corporations holding over $2.5 trillion cash overseas, to bring it back to US and taxing the same as a one time deemed repatriation tax of 10%.
5. End to the deferral of taxes on corporate income earned abroad.
How will Mr. Trump pay for it? Here is the explanation:
" With this huge reduction in rates, many of the current exemptions and deductions will become unnecessary or redundant. Those within the 10% bracket will keep all or most of their current deductions. Those within the 20% bracket will keep more than half of their current deductions. Those within the 25% bracket will keep fewer deductions. Charitable giving and mortgage interest deductions will remain unchanged for all taxpayers. Simplifying the tax code and cutting every American’s taxes will boost consumer spending, encourage savings and investment, and maximize economic growth."
If Indian tax payers/tax professionals are reminded a wee bit of the Direct Tax Code ( that was launched with fanfare by former Finance Minister Mr. Chidambaram and has now been laid to rest by the current govt.), then it might not be a far-fetched connection. When the DTC was unveiled, the words to describe the objective of the new Code were the same: " Simple code.. fewer deductions.. lower rates.... "
Mr. Trump would hope that he gets the chance to see his radical tax plan pass muster first with the Republican voters, then the general election voters and ofcourse finally the US Congress. Not easy, but well, Mr. Trump is the author of the bestseller - " The Art of the Deal. "