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ELECTION
IMPACT
PRESIDENT TRUMP AND TAXES
By Jim Rice, CPA, Sol Schwartz & Associates
Donald Trump will take office on January 20, 2017 as the 45th
President of the United States. When the 115th Congress convenes
this January, the Republican Party will be in control of the Presi-
dency, the House of Representatives and the Senate. Whereas there
are differences in Trump’s proposed tax legislation and the proposals
published by the House Ways and Means Committee, there are still
some similarities that lead us to believe that tax legislation is likely
to be enacted in 2017.
A political candidate’s proposals can and often do change after tak-
ing office, so my discussion here is a broad-brush picture of some of
the major tax proposals that Trump has discussed and that likely will
be considered by Congress.
Under Trump’s proposal, the individual income tax rates would
be lowered. The proposed rates when compared to the 2016 tax rates
would look something like this:
• 2016 tax rates of 10 percent and 15 percent would be 12 percent
under the proposal
• 2016 tax rates of 25 percent and 28 percent would be 25 percent
under the proposal
• 2016 tax rates of 33 percent, 35 percent and 39.6 percent would
be 33 percent under the proposal
The tax rates for long term capital gains and dividends would pre-
sumably be re-aligned to mirror the proposed rates above with a
maximum rate of 20 percent.
Trump has proposed to repeal the Alternative Minimum Tax
which currently is generally a flat tax of either 26 percent or 28 per-
cent on taxable income has modified by the elimination of certain
deductions. Many taxpayers are subject to the Alternative Minimum
Tax. The last time Congress reviewed this tax, there was a vote to
provide higher exemptions to reduce the number of affected taxpay-
ers, but there was no effort to eliminate this tax.
President-elect Trump has also proposed to eliminate the federal
estate and gift tax. He also proposed that inherited stock and other
24 San Antonio Medicine • January 2017
assets from estates of more than $10 million would not get a tax
basis step up, thus making sale of those assets after inheritance sub-
ject to potentially higher taxes. Republican members of Congress
have criticized this last proposal. Some Democrats are against any
repeal of the estate and gift tax.
The Affordable Care Act, also known as Obamacare, had created
new surtaxes to help fund certain provisions of the Act. During
Trump’s campaign, he made repeal of Obamacare a top priority. Re-
peal of Obamacare may entail elimination of the surtaxes. These sur-
taxes include the 0.9 percent additional Medicare tax on high dollar
wages and self-employment income and a 3.8 percent Medicare tax
on net investment income, including long-term capital gains and
dividends. Some of the more recent discussion has been to repeal
certain parts of the Obamacare act.
The current corporate tax rate is 35 percent. Trump has proposed
to reduce this tax rate to 15 percent. Further, he has proposed ex-
tending this 15 percent rate to other businesses such as partnerships
and sole proprietorships.
As you can see, there are major tax proposals that will be consid-
ered in the next several months. Compromise will surely be the
order. No one knows today what those compromises will consist of.
Still, it is good to know what proposed legislation is being discussed
and that the climate for taxpayer friendly law changes is excellent.
Is there any tax planning to do right now? If you have the ability
to defer income from the tax year 2016 to 2017 or accelerate deduc-
tions into 2016 from the year 2017, then you should discuss these
options with your tax advisor.
Jim Rice, CPA is a shareholder at Sol Schwartz & Asso-
ciates, P.C. (jprice@ssacpa.com). He has over 38 years of
experience in public accounting. In addition to providing
business consultation, financial planning and various other
accounting services, Jim specializes in income tax planning and consul-
tation. He works with a high concentration of physician practices and
high net worth individuals.