Trump’s FY 2018 budget outlines tax reform proposals

Since taking office in January, President Trump has called for comprehensive tax reform. The President’s recently released fiscal year (FY) 2018 outlines some of his key tax reform principles. At the same time, White House officials said that more tax reform details will be released in coming weeks. These details are expected to describe rate cuts for individuals and businesses, new incentives for child and elder care, elimination of certain deductions and credits, and more.

Note. The President’s budget is a blueprint for Congressional action. “This is the message from the President to the Congress and says, look, here are my priorities in terms of where I want to spend more; here’s what I think should be spent; here’s where the big-ticket items are,” White House Budget Director Mick Mulvaney told reporters in Washington, D.C. at a news conference unveiling the FY 2018 budget proposals.

Tax measures

The President’s FY 2018 budget highlights a number of tax reform proposals, leaving details for later. The President called for tax reform that lowers individual tax rates, expands the standard deduction, and protects homeownership, charitable giving and retirement saving. The FY 2018 budget also urges Congress to repeal the alternative minimum tax (AMT), the federal estate tax and the net investment income (NII) tax.

The President’s FY 2018 also highlights some business tax proposals, including lower rates for corporations and other business entities. To offset the cost of lower rates, unspecified business tax expenditures would be repealed.

Note. Federal law requires that every budget list all tax expenditures. Generally, a tax expenditure is any item that causes a loss of revenue due to a special exclusion, exemption, or deduction from gross income or which a special credit, a preferential rate of tax, or a deferral of tax liability. The FY 2018 budget lists more than 160 tax expenditures.

Health care and taxes

The Affordable Care Act (ACA) created the NII tax and a number of other new taxes. The President’s budget assumes the ACA will be repealed and replaced with the American Health Care Act (AHCA). As passed by the House in April, the ACHA repeals the NII tax, the additional Medicare tax, the excise tax on medical devices, and more. The Senate is currently debating the AHCA.

Funding the IRS

Earlier this year, President Trump proposed to reduce the IRS’s funding and his FY 2018 budget reflects that. However, in past years, Congress has restored some of the proposed funding cuts to the IRS. Last year, Congress gave the IRS an additional $290 million with instructions to use the funds for taxpayer services and to curb tax-related identity theft.

Additionally, President Trump proposed giving the IRS more authority to correct errors on taxpayer returns. The FY 2018 budget also urges Congress to expressly grant the IRS authority to regulate return preparers.

Family leave

President Trump also proposed to create a new benefit within the Unemployment Insurance (UI) program. This new benefit would provide up to six weeks paid leave to mothers, fathers, and adoptive parents.

If you have any questions about the President’s FY 2018 budget, please contact our office. Our office will keep you posted of developments as Congress begins to debate the President’s proposals and more details are released by the White House.

Written by

Steve Moss, CPA is a partner at Holden Moss CPAs and loves helping businesses and their owners grow to be the very best they can be. Our other offices include Raleigh, Oxford and Warrenton. We are a little different at Holden Moss CPAs. While we still provide traditional tax and accounting services, years ago we realized many clients wanted help in running their businesses and were hungry for ideas, solutions, strategy, and execution. In response, we expanded our skill set and joined Ran One, a global network of business consulting firms. Our membership with Ran One gives us access to proprietary resources and analytical software to help our clients grow, become more profitable and valuable, and have the lifestyle they desire. Now, blended into the fabric of our normal tax and accounting needs, we are focused on our clients’ businesses in a very different way. While our approach is not right for everyone, for those whom it is, incredible results may be obtained. Whether you have a new, or established, business, or for those in transition of selling or retiring, or for those who simply need to develop an exit strategy or succession plan, our unique approach to client service may be the edge you need.

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