By now you have probably heard the Trump administration revealed their general outline for tax reform.  The reform touches on both corporate and individual taxes so bear with me as I outline the takeaways from both below.

1. Tax brackets are shrunk to three at 10 percent, 25 percent and 35 percent.
2. Majority of deductions are eliminated except mortgage and charitable deductions.
3. The Earned Income Tax Credit is doubled and the AMT is eliminated.
4. The Standard Deduction is doubled to $12,500 for individuals and $25,000 for families.
5. The Inheritance Tax is repealed.
6. Investment Income is taxed at 20 percent instead of 23.8 percent.
7. The corporate tax rate is cut from 35 percent to 15 percent.

When I say the tax plan amounts to a broad outline it is true.  Their is no detailed policy proposal or analysis to go with this idea.  It is merely a one or two page document from the White Housing saying these are the items we would like to see in tax reform.  Notably, the border adjusted import tariff is absent (a nod to business concerns).

The document’s release coincides closely with the end of the administration’s first 100 days (Saturday). Despite its failure to repeal the ACA the Trump camp and House leaders continue to work on a repeal bill.  However, it is notable they are not including Senate leadership where the repeal bill’s fate will ultimately be decided.

But, back to the Trump camp’s tax reform outline.  The move is a big win for low income families that pay no income tax.  A doubling of the EITC would mean a single individual could see a refund even if they pay no taxes up to almost $30,000.  For lower to middle income earners doubling the standard deduction would be a significant boon, especially when combined with the mortgage interest and charitable deductions remaining in effect.  However, there was no information on what income level these brackets would encompass.

Democrats and liberals are sure to loathe the repeal of the AMT (Alternative Minimum Tax) and decreasing the investment income tax.  Both would dramatically benefit the wealthy.  For that matter so would repealing in its entirety the inheritance tax or let’s call it what it is, the death tax.

Corporations, large and small, on the surface benefit from the drop in corporate tax rates.  However, many businesses, large and small, rely on numerous loopholes in the tax code to not pay the maximum 35 percent tax.  For example, small businesses benefit from such deductions as hiring veterans or older workers.  Investing in infrastructure is another deduction.  But removing these deductions might make some businesses pay more.

While there is something in this guideline for everybody there is also something for everybody to oppose.  For example, young families might object to removing the childcare tax deduction.  The wealthy lose access to deductions for investment income for their estate.  The middle class benefits from bumping up the standard deduction but loses access to deductions on saving for healthcare costs, retirement and more.  Now, whether an individual wins or loses based on these ideas for reform depends on the situation.  But, more likely than not, the simplistic form of this reform is unlikely to survive.

Whether it could even survive Congress is debatable though they did take out the most contentious aspects of the reform for business.  But Democrats are sure to balk at the cuts for the wealthy while deficit hawks in the GOP are sure to not like the price tag.

Still, the outline does give the Trump administration something to start from with Congress.  It also allows them to say they have worked up an outline for tax reform within the administration’s first 100 days.

Something to keep in mind moving forward.  The failure of the AHCA will impact tax reform.  If the bill is not deficit neutral, as expected, and is passed under budget reconciliation, the reform will have a ten year sunset.  The AHCA cut the deficit by 900 billion over ten years and that offset could have been transferred over to any tax reform bill.  Well, without a repeal bill in effect those savings cannot be realized and transferred over to tax reform.

Still, this is a wishlist of what the Trump administration would like to see.  They have learned from their healthcare debacle and put out their ideas for reform.  Now comes the part where they engage with Congress to get a finalized product through.  If healthcare is any indication, it will be a long and tumultuous process.