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The Trump Tax Plan: What’s In It and How It May Affect You

September 27, 2017

 Whether President Trump’s tax plan becomes law depends entirely on politics.

3 min read

On Wednesday, the Trump Administration released its long-awaited blueprint for a tax system overhaul. Whether it becomes law depends entirely on politics.

Tax reform was a signature plank of President Trump’s 2016 presidential campaign, and Republicans say it’s necessary to give a boost to the economy. Getting tax reform passed isn’t as easy as it sounds.

The last time our nation’s tax system was significantly overhauled was in 1986 under then President Ronald Reagan, when the top tax rate was reduced to 38.5% from 50%, and the number of tax brackets was consolidated. The overhaul also eliminated numerous tax loopholes and shelters. Passing it required enormous give and take from Republicans and Democrats alike.

Tax brackets have not received a major overhaul since the 1980s under President Reagan

In 2014, there was an attempt at bipartisan tax reform. But that effort was shelved by Congress because it lacked the necessary votes. Now that Republicans control Congress, experts are predicting that the odds may be stacked in favor of an overhaul.

Nevertheless, it will still take bipartisan cooperation to make President Trump’s tax plan a reality. Experts on both sides of the aisle have cautioned that the same divisions that derailed Republican plans to gut the Affordable Care Act (ACA) could play out with tax reform.

Here are highlights of the proposed changes to the tax code:

Tax reform: A tough slog ahead

Details of this proposal for tax reform will need to be ironed out by both houses of Congress, with support from both Republicans and Democrats. This may not happen overnight. It took Reagan two years to get his tax reform through Congress in the 1980s. Expect current tax reform to take months, or longer, to hammer out.

Although Republicans say tax cuts will fuel economic growth, the plan would reportedly add more than $1 trillion to budget deficits over the next decade, according to reports.

Key takeaways

By Jeremy Quittner
Jeremy Quittner is the financial writer for Stash.

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