5 Ways Trump Could Impact Your Wallet
With President-elect Donald Trump preparing to take office, tax policy in America is likely nearing a shift. Tax changes are probably a matter of “when” not “if” at this point. We want to share the best article we’ve found on how Mr. Trump’s tax plan will affect you. Tom Wheelwright is a Rich Dad Advisor, and he has 5 predictions for the first 100 days of a Trump presidency based on several campaign promises.
1. Fewer Tax Rates/Broader Tax Base
President-Elect Trump and the Republican Congress have all indicated that they want to broaden the tax base and reduce the number of tax rates to three: 12%, 25% and 33%. On the surface, this change appears to be a tax reduction. However, the second part of this plan is a broadening of the tax base. Broadening the base means there will be several tax benefits that likely will be repealed. For example, when Reagan passed his tax plan, he also reduced the rates (initially to two rates) and at the same time eliminated many tax benefits for those who invest in real estate and businesses.
2. Business Rate Reduction
President-elect Trump wants to reduce business tax rates to 15%. The Republican Congress has suggested a reduction to 25%. In either case, this change should have the effect of making U.S. exports more competitive with the rest of the world. The U.S. currently has the highest business tax rates in the world. A 15% rate would move the U.S. to one of the lowest tax rates and likely would attract businesses from around the world to locate in the U.S. This reduction is the one most likely to have a significant impact on jobs.
3. International Tax Amnesty
The current U.S. international tax regime is punitive for U.S. corporations and puts U.S. companies at a huge disadvantage compared to the rest of the world. Look for a potential international tax amnesty, which would allow multi-national corporations to bring back almost $3 trillion in cash held overseas at a lower tax rate, say 10%, and would produce a huge influx of investment capital into the U.S. combined with a lower tax rate and better rules for multi-national companies headquartered in the U.S., the amnesty would completely change the landscape for U.S. businesses and would encourage companies to headquarter within the U.S. rather than just shipping into the U.S.
4. Estate Tax
President-elect Trump and the Republican Congress have vowed to repeal the estate tax. This tax change would likely result in a massive tax increase for everyone who doesn’t currently pay estate tax because real estate and other gains would be taxed. Under the current estate tax rules, capital gains on property go away entirely when someone dies. Without the estate tax, this tax benefit logically would be repealed. So someone who owns a house that is worth $500,000 when they die and for which they paid $100,000 would end up with a capital gains tax to their children or other heirs on the $400,000 gain of $60,000 or more.
5. Alternative Minimum Tax
Almost everyone, Republican and Democrat, would like to see the Alternative Minimum Tax repealed. It is a tax that originally was meant to ensure that the very rich pay some tax. Currently, this AMT has a much greater impact on the middle class, especially those living in high-tax states such as California and New York. A repeal of this tax would be welcomed by many on the two coasts who pay high income taxes and currently get no benefit from their state tax deduction as a result of the AMT.
The big unknown is how President-elect Trump and his administration plan to pay for all of these tax benefits. It’s very clear that economic growth alone cannot pay for the tax proposals, so either there will need to be a new tax, such as a Value Added Tax (which would put us on par with the rest of the world) or major tax benefits for industries such as oil, coal, timber, agriculture and real estate would have to be reduced or eliminated.
(Read original article here.)
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