Anticipated Tax Reform
With the election behind us and the Republicans soon to be in control of the White House, Senate and House, anticipation is building for 2017 to be a year of major tax reform. These changes in the tax code could easily be the most significant our country has seen since Reagan.
We believe the final outcome will be a significant simplification from the current 7 tiers of tax brackets and, ultimately, a likely compromise between the competing Congressional and Trump proposals. We will likely end up with just 3 income tax brackets: 12%, 25% and a top rate of 33% for married couples earning $225,000 or $112,500 for individuals. Both proposals will retain the reduced rates for capital gains and qualified dividends.
Deductions are where the proposals diverge substantially, with the House of Representatives version eliminating most every individual tax deduction except mortgage and charitable deductions (combined with an expanded standard deduction). President-elect Trump’s proposal would keep the current deduction rules, but cap itemized deductions at $200,000 for joint filers and $100,000 for individuals. Only time will tell whether Washington can make this tax reform a reality in 2017. The minority Democrats still retain the ability to filibuster legislation so the Republicans will be incented to compromise.
This commentary contains forward looking statements and opinions. These opinions may not develop as predicted. It is our goal to help investors by identifying changing market conditions. However, investors should be aware that no investment advisor can accurately predict all of the changes that may occur in the market.