By Sheryl Rowling
SAN DIEGO — We are facing a new administration in 2017. Without focusing on scary “what ifs, ” I thought it would be good to look at the potential tax and financial implications of a Trump presidency. It remains to be seen whether and to what degree the new President and Congress will move to implement campaign promises. However, based on the Republican majority in the House and Senate, we are likely to see many of the tax and financial proposals implemented.
From a tax standpoint, we can expect lower tax rates, the elimination of some taxes and some tax law changes. The corporate tax rate may decline to a maximum 15 percent. The maximum individual rate is anticipated to drop from 39.6 percent to 33 percent. The new tax brackets will be:
- 0%
- 12%
- 25%
- 33%
We might also see the elimination of Alternative Minimum Tax (AMT) as well as the repeal of estate and gift taxes. These particular changes will especially benefit high income/high net worth taxpayers.
Although individual tax rates should decrease due to lower brackets and the elimination of AMT, Trump has discussed limiting deductions except for mortgage interest and charitable contributions. There is also talk of a new deduction for the average cost of childcare.
What this means is that tax liabilities will likely significantly drop for high income individuals and corporations. Taxes will probably stay the same or decrease somewhat for low income individuals. And, as for the middle class? My guess is that they will see either little change or an increase in taxes.
Other likely financial implications of a Trump presidency include repeal of the Affordable Care Act (ACA or Obamacare) and the elimination of annual increases to the Social Security wage base. A repeal of the ACA without having a workable alternative first could leave many Americans without health insurance. The elimination of the annual increases to the Social Security wage base will mean no increases in Social Security tax on high earners and, accordingly, less money in the benefits pool.
Of course, there are many other potential non-financial changes that can have major effects on individuals, our country and our world. Let’s hope and pray that our worst fears will not be realized.
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Rowling is a certified public accountant, personal finance specialist, and principal of Rowling & Associates. She may be contacted via sheryl.rowling@sdjewishworld.com.