Trump's Tax Plan

 Donald Trump's tax plan proposes a mix of tax cuts, incentives for specific industries, and significant tariff increases, aiming to boost economic growth while advancing his economic and trade policy priorities.

A major element of his plan is to make the 2017 Tax Cuts and Jobs Act (TCJA) permanent. This includes retaining reduced individual and corporate tax rates, which otherwise will expire after 2025. Additionally, Trump suggests restoring full deductions for state and local taxes (SALT), potentially benefiting high-income earners in states with higher tax burdens. His plan also proposes exempting certain types of income, like tips, Social Security, and overtime pay, from income tax, which could reduce taxable income for many workers and provide modest economic stimulus.

For corporations, Trump aims to lower the corporate tax rate specifically for domestic manufacturing to 15%, positioning the U.S. as more competitive for industrial production. He has also proposed removing tax credits related to green energy, targeting the rollback of incentives from the Inflation Reduction Act.

Trade policies are integral to his 2024 plan as well. Trump’s proposal includes a universal 20% tariff on all imports, with an additional 60% tariff on imports from China, a move designed to protect U.S. industries but expected to raise consumer costs. Analysts predict that while this could increase revenue, it might also lead to economic contraction due to potential retaliation from trading partners and rising import prices for consumers.

Economists estimate that his plan could boost GDP modestly by up to 0.8% over the long run, but it may also increase the national debt by trillions over the next decade, depending on growth and revenue assumptions. This deficit increase stems in part from anticipated lower tax revenues and higher interest payments on new debt, leading to a projected rise in the debt-to-GDP ratio​.

 

What If the Tax Cuts and Jobs Act Isn’t Extended? Key Changes to Expect

The Tax Cuts and Jobs Act (TCJA), enacted in late 2017, brought significant changes to the American tax landscape. As we approach its expiration in 2025, many are left wondering what might happen if the act isn’t extended. Here’s a look at the potential consequences for individuals, businesses, and the economy as a whole.

1. Increased Tax Rates for Individuals

One of the most immediate impacts of the TCJA expiring would be a return to higher tax rates for many Americans. The act lowered tax brackets and rates, providing relief for middle-class families and reducing the overall tax burden. Without an extension, taxpayers could face increases in their marginal tax rates, which might mean less take-home pay and decreased disposable income.

2. Elimination of the Increased Standard Deduction

The TCJA nearly doubled the standard deduction, making it a popular option for many filers. If the act is not extended, this deduction would revert to its pre-TCJA levels, potentially increasing taxable income for millions. Families who benefitted from the larger deduction could see their tax bills rise significantly.

3. Changes to Itemized Deductions

The TCJA also made changes to itemized deductions, including the limitation on state and local tax (SALT) deductions to $10,000. If the act expires, this cap could disappear, leading to different outcomes based on geographic location. Taxpayers in high-tax states could see their deductions increase, but those in lower-tax areas might find it less impactful.

4. Corporate Tax Rate Increases

The corporate tax rate was lowered from 35% to 21% under the TCJA, providing businesses with more capital for investment and growth. Without an extension, corporations could face a significant tax hike, which may impact their ability to reinvest profits, pay dividends, or hire new employees. This could slow economic growth and affect job creation.

5. Changes to Estate Tax Exemptions

The TCJA raised the estate tax exemption significantly, allowing individuals to pass on larger estates without incurring taxes. If these provisions expire, the exemption would revert to pre-TCJA levels, potentially impacting estate planning strategies for wealthy families and increasing the tax burden on heirs.

6. Impact on Economic Growth

The TCJA aimed to stimulate economic growth through various measures, including tax incentives for businesses. If the act is not extended, there could be a chilling effect on investment and consumer spending, leading to slower economic growth. Businesses might scale back expansion plans, and individuals may tighten their budgets.

7. Potential for Increased Deficit

While the TCJA aimed to stimulate growth, it also increased the federal deficit. If tax cuts expire, there could be a balance between revenue generation and deficit reduction, but it may also lead to debates over how to manage the federal budget moving forward.

8. Political Ramifications

The expiration of the TCJA is likely to reignite political debates around tax policy. Lawmakers will need to navigate differing opinions on taxation, economic growth, and social equity. The outcomes could influence upcoming elections, with candidates offering various proposals to address the potential tax changes.

Conclusion

The potential expiration of the Tax Cuts and Jobs Act could lead to a host of changes affecting individual taxpayers, businesses, and the economy. Whether it’s through increased tax rates, reduced deductions, or shifts in corporate taxation, the impacts could be significant. As we approach the 2025 deadline, it's crucial for taxpayers to stay informed and consider how these changes could affect their financial situations. Engaging in conversations about tax policy now could help shape a more favorable outcome in the future.

Indiana Unemployment Taxes

In 2008, at the peek of the recession, many states had to take loans from the federal government to meet demands of unemployment funds.  Indiana took the largest of these loans.  The result was a penatly in the form of a reduced credit for state unemployment taxes paid on the federal unemployment tax form.  Business have been paying an extra 1.8% in federal unemployement taxes on each of their employees first $7,000 of wages since.

In October, Governer Pence announced that Indiana now had the funds to payoff the remainder of this loan.  The result is the removal of the 1.8% credit reduction, starting in 2015.  For an employer with $35,000 in taxable wages (5 employees making over $7,000) the tax saving for 2015 will be $630.

Indiana had to take the loan because the state unemployment fund was wofully underfunded.  In order to correct this Indiana increased the taxable wage base by $2,500 (from $7,000 to $9,500) and increased all business tax rates.  Business in industries seeing the largest amount of unemployement claims (construction, specialty contractors, etc.) saw the biggest increase.  The highest rate before the loan was 6.2%.  After the loan rates are as high as 9.484%.  Now that the loan is paid off, business taxpayers with positive experience accounts should see a signifant decrease in there experience rate for 2016.  I have already dealt with two contractors whose rates decreased 2%.  That is a $190 savings per full time employee. For Indiana business this is welcome news for the new year!