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Trump Tax Reform: Good, Bad, and Unknown

The opinions expressed by columnists are their own and do not necessarily represent the views of

Last week, President Trump sent the Secretary of the Treasury out to propose changes to the Internal Revenue Code. The proposals were extremely broad and leave as many questions as they provide answers.


The proposed changes in business taxes bode well for all investors, particularly for job creation and the underfunded pensions of every state and municipality in the country. The individual tax proposals appear to be a mixed bag, need significant development and a sanity test to determine if they will discourage home ownership and charitable contributions. The estate tax proposals are essentially incomplete without any explanation of what happens after the estate pays no taxes. Will the heirs ultimately pay an income tax on the appreciation untaxed at death; will all heirs find themselves paying income taxes on what is inherited rather than the super wealthy alone paying estate taxes.

More to come, but one can make some initial observations:

  • On the whole, the 15% tax on business is a home run. The lower tax rate will improve American competitiveness, increase jobs and increase the value of equities which in turn will reduce the underfunding of governmental pensions for every state and municipality.
  • The required inclusion of a repatriation of foreign income stuffed overseas and a territorial tax system is long, long overdue.
  • The proposal is eliminate "tax breaks for special interests" is nothing less than embarrassing without detail in the proposals

Individual Reform

  • Reducing the number of tax brackets is nothing less than silly. No one cares how many tax brackets there are; everyone cares about how much tax they pay.
  • Doubling the standard deduction is an interesting proposal. There are cultural issues in this proposal that need fulsome discussion. Will this proposal decrease home ownership and will it decrease charitable contributions? The current tax system encourages home ownership and charitable contributions. It is unknown the impact of increasing the standard deduction and therefore eliminating the home interest and charitable deductions will have on housing, charity and culture.
  • Providing tax relief for families with child and dependent care expenses is a happy bromide. The devil is in the calculation and the amount. Again, who knows what is intended economically or in terms of the complexity of tax return preparation.


  • "Eliminate targeted tax breaks that mainly benefit the wealthiest taxpayers" is another happy bromide. Other than the 'carried interest' for hedge fund managers which was targeted by every political candidate in 2016, it is impossible to know what is being proposed.
  • "Protect the home ownership and charitable gift tax deductions" appears to be a proposal to eliminate the medical deductions, tax deductions, investment interest deductions, casualty loss deductions and miscellaneous deductions.

The medical deduction percentage should be raised to twenty percent. At that point, it will only impact the seriously ill who for whatever reason are uninsured.

The casualty loss deduction lowers the economic impact to individuals that are victims of natural disasters such as earthquake, tornados and hurricanes. It also indirectly provides funds to individuals to rebuild their communities. This is an extremely important tax deduction.

Eliminating the deduction for state and local taxes would have been a great idea in the original tax code. With an increased standard deduction as proposed, it would only increase taxes for the wealthy taxpayers of high tax states. The author will leave this one without comment.

  • Repealing the alternative minimum tax if there is an elimination of the deduction for taxes and an annual limit on net operating loss carryforwards (not proposed) would impact virtually no taxpayers.
  • Repealing the death tax. There are so many unknowns here.

If there would be carryover basis (the heir must determine the cost of every asset in the hands of the decedent and pay tax on that cost), there is virtually no simplicity and perhaps less simplicity in repealing the death tax. Someone is going to have to do more work to determine the basis of most assets than currently required to prepare current estate tax returns. The IRS would need to require a tax return to identify basis to the heirs otherwise future IRS examinations of the cost of assets for heirs would be a nightmare.

If there is no carryover basis, the repeal of the death tax is a huge tax cut for the wealthiest families in the United States. Less than 5,000 of the 2.5 million Americans who die each year pay an estate tax. Despite successful attempts to convince Americans that these estates are being taxed a second time, any appreciation in asset values that has not been taxed is not being taxed a second time. (Think Buffet, Gates, Zuckerberg, Bezos.)

If there is carryover basis for everyone, any of the heirs of the currently untaxed 2.5 million estates in this country that have appreciated property will see new federal taxes on the sale of these assets. This would mean that virtually any decedent passing away who owns a family home would have their heirs pay income taxes when they sell the homes where today that transaction is tax free.


Tax reform always has winners and losers.

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