President Trump recently indicated that he will announce a tax reform proposal within the next two to three weeks. The existing tax proposals from President Trump and the Congressional Republicans are predictably vague at this point without a lot of visible consideration of particular industries. Many believe that tax reform is imminent with a Republican-controlled Congress and Republican President. However, the existing proposals show that President Trump and the Republicans disagree on the approach that should be taken in some areas such as border adjustability.
Congressional Republicans propose to replace the current income-based approach to taxation of businesses with a cash-flow (or consumption) based approach. This quasi-VAT would allow for border adjustability of the imposition of tax; namely, the tax would be rebated on exports, but imposed on imports, much like many foreign value-added tax schemes. President Trump has expressed reservations about border adjustability but has advocated the imposition of as-yet unspecified import tariffs.
The Republicans also propose shifting to a territorial system from the current worldwide system of international taxation. Foreign earnings generally would be able to be repatriated to the US without additional tax cost, though foreign earnings accumulated overseas under the current system would be subject to repatriation tax at rates of 8.75% (for cash and cash equivalents) and 3.5% (for other property). The controlled foreign corporation and subpart F rules would be largely eliminated (with some provision to continue to tax passive income earned through offshore structures). The Trump administration, however, proposes a 10% tax on repatriations but has offered no general plan for a territorial tax system.
The tables below summarize other specific reforms for individual and corporate taxation based on the existing proposals from President Trump and the House Republicans. While it remains uncertain as to what the Trump Administration's forthcoming proposal will include, it may incorporate many of the reforms below.
