Republican control and tax legislation in 2017

With Donald Trump in office and Republicans in control of the Houses of Congress, there is a lot of speculation as to what the major tax legislation and tax cuts will be this year. Even though it is too early to know if significant tax reform will take place, some key proposals made during the campaign and in Trump’s 100-day plan will be discussed below.

Affordable Care Act

In his 100-day action plan, Donald Trump intends to propose legislation that repeals and replaces the ACA. This could mean that the net investment income tax, the Cadillac tax on high-end insurance plans, and the medical device tax will be eliminated.

The following items are part of the replacement plan:

  • Health Savings Account usage
  • Healthcare purchases across state lines
  • State-managed Medicaid funds
  • Accelerating FDA approval of drugs on waiting list by streamlining authorization process
  • Continued pre-existing conditions protection
  • The right to keep children under 26 on a parent’s insurance plan
  • A tax deduction for insurance premium payments

Repatriation

A 10 percent one-off tax on total un-repatriated overseas earnings of American companies is being proposed. Coupled with an annual tax (at the lowest U.S. minimum tax rate) on income earned overseas, this repatriation would be part of a ‘worldwide’ tax system.

Infrastructure

Donald Trump has proposed to invest $1 trillion in new infrastructure projects over 10 years. This investment would rely heavily on private funding for projects such as updating highways, bridges, tunnels, power lines, airports, schools and hospitals.

Carried interest

The portion of an investment fund’s returns that is paid to the fund manager is described as ‘carried interest’. Generally, this income is taxed at lower capital gains rates. However, Trump plans to tax this income at ordinary income rates.

For summarizing charts on the proposals for tax reform compared to current law or federal tax liabilities of a joint filer using the 2016 income tax rates and the proposed rates, please consult the original source.

If you have any questions do not hesitate to contact your Baker Tilly Berk adviser.

Source: Baker Tilly US