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Analysis

President Trump tax policy

What are the Republican tax policies?

How will President Trump’s tax reform plans shape the tax policy debate in Washington?

Tax policy decisions ahead: Impact of the 2016 elections

The election of a new president typically ushers in the prospect of significant policy changes. From the standpoint of tax policy, however, it's unclear whether the tax code changes that Trump has envisioned will be enacted into law in their current form.

This lack of clarity could be due in part to the fact that, in the months leading up to the election, Trump's tax policy never really emerged as a top-tier issue on the campaign trail or in the general media. The proposals he discussed in his speeches and position papers in many cases lack technical details to explain how specific provisions would operate, and we may not see any fully fleshed-out proposals until his administration sends its first tax and spending plan to Congress in 2017.

Deloitte Tax LLP’s latest report looks at Trump’s tax proposals, the views of key congressional leaders, and the outlook for enacting significant changes to the tax code in the coming year.

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​Business taxes

In August, when he delivered his first economic address as the GOP presidential nominee, Donald Trump told the Detroit Economic Club that the current US tax laws "punish companies for making products in America" and promised that his adminstration would promote tax policies—centered on lower rates and simplification—that he characterized as "geared towards keeping jobs and wealth inside the United States."

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​Individual taxes

Like Trump's business tax plan, his proposals for individuals include significant tax relief in the form of rate cuts, some new proposed incentives, and the repeal of some existing taxes, coupled with proposed base-broadening measures.

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​Estimated revenue impact

Many of the provisions in President-elect Trump's tax plan—such as his proposal to reduce the tax rate for business passthrough income for electing entities—lack the technical detail to produce a precise estimate of their impact on federal revenues.

Based on available details, plus a set of assumptions regarding how certain proposals would operate, an analysis by the nonpartisan Tax Policy Center indicates that his tax plan would net decrease federal receipts by an estimated total of $6.15 trillion between 2016 and 2026. Of that total, some $3.34 trillion comes from individual tax relief proposals, $2.63 trillion from corporate tax relief, and $174 billion from estate tax relief.

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The politics of policymaking

At first glance, the fact that Donald Trump is headed to the White House and will be working with a Republican Congress in 2017 would appear to be a clear path for possible action on tax reform. Nonetheless, some obstacles are likely to remain.

Trump's tax plan, which adopts a traditional Republican approach of broadening the base and lowering the rates, may present practical difficulties. The original version introduced in 2015 has been recalibrated in recent months to address concerns that it would substantially add to the deficit. But his revised plan, based on separate estimates from the Tax Foundation and the Tax Policy Center, would still lead to trillions of dollars in revenue losses over 10 years under both traditional and "static" scoring models, as well as "dynamic" models that account for the revenue effects of the plan's impact on economic growth.

Given that federal receipts over the next decade are projected to total roughly $42 trillion, Trump's plan as it is currently structured would require either a very large reduction in federal spending or a significant increase in the deficit.

Moreover, tax policy is not written exclusively by the president. Congress will want to have its say, and lawmakers do not speak with one voice.

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Senate results from the 2016 election

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