How Trump's Tax Plan Will Affect Utah
After the White House’s release of a one page, bullet point outline of a tax plan, experts are still analyzing what impact the proposed changes could have. The new tax plan aims to provide tax breaks to the middle class, build business and close loopholes.
“So this sketch really has a lot of people speculating about what this plan really will do,” said Nathan Seegert, assistant professor of finance at the University of Utah. “For example, all non-partisan groups say that Trump’s tax plan will be very expensive, but the question is: is that a two trillion dollar expensive, or a seven trillion dollar expensive?”
Seegert is one of the many tax experts working to unpack what this plan really means. This analysis is based on the little documentation that has been provided about the plan.
“Even the Trump campaign had a more detailed plan than what we have so far from the White House,” Seegert said.
One of the plan’s stated goals is to provide tax breaks for the middle class. But according to Seegert, that aspect of the plan is more complicated here in Utah. The plan raises the standard deduction, which will help people who claim the standard deduction rather than itemizing their deductions.
However, many Utahns don’t claim the standard deduction, because large charitable donations and mortgages are common here and are worth more when itemized. Utahns will have to choose between large deductions, like mortgages and charitable donations, and claiming the new higher standard deduction.
The plan is also aims to help businesses, but according to Seegert, it won’t do much for nine out of 10 businesses, and the companies it helps will be the largest ones.
“The plan lowers the corporate tax rate to 15 percent. But 90 percent of businesses already pay 15 percent, so that will have no effect on those small corporations,” Seegert said. “However, a very few large corporations will see their marginal tax rates fall from 35 percent to 15 percent, which would be a large windfall for those companies.”
Closing tax loopholes is another major goal.
“So that’s kind of the interesting thing about this plan: it doesn’t address some of the largest loopholes that have been the focus of debate in tax policy,” Seegert said. “But it does open up a new one that is very interesting.”
Seegert said the new plan will allow some individuals to claim their wage income as business income, which would drastically lower their tax rates from standard income tax to the new 15 percent business tax rate.
These proposed changes have yet to be explained by the White House beyond the outline that was initially provided. According to Seegert, the two most important aspects of tax policy are efficiency, and who stands to win and lose. While analysts work to make sense of the potential impact of this plan, the majority of its influence remains to be seen.