3 Things to Expect from Trump’s Tax Reform

After an unexpected defeat on the healthcare legislation, investors are now focusing on the much-hyped Trump’s Tax Reform. This move has polarized citizens and economists’ alike, leaving little room for careful contemplation. Trump is positive about the acceptance of tax reform and is expecting the Congress to support his plan of action. Steven Mnuchin, the Treasury Secretary, claimed that unlike the healthcare bill, Tax reform is straightforward and easy to understand and apply.

Trump signals that tax reform will arrive sooner than expected as he stated “We will probably start going very, very strong for the big tax cuts and tax reform”. Here are three things to expect from this reform.

Trump's Tax Reforms

Border Adjustment


The new tax reforms are hoped to remodel the taxation system implied on businesses. Exports will be removed from the tax base while imports will be included in it. Known as the border adjusted system, this new tax regime will change accounting for retail firms forever, especially those that import goods. Retailers are against the new system, along with some Republicans, who do not see costly imports as a boon to the economy. It is also important to know that America is a big importer of many products and increase in their cost will affect the average consumer. It will not only inflate household expenditure but would also prompt people to curb consumption, leaving the economy in a state of stagnant growth.

Changes on Individual Taxes


The tax brackets for American individuals will be cemented to a total of three rather than seven. The current filing status enjoyed by the head of the family would be eliminated with the NIT. Tax provisions will be given on programmes related to childcare. Almost all of the Americans will be able to deduct childcare costs from their adjusted gross income.  If the couple’s earning go beyond the $50,000 mark, they would not be allowed to enjoy the deduction. Families coming from the lower income group would be given credits of $1200 over expenses on childcare. Individual’s minimum taxes will be eliminated in Trump’s Tax Reform

Moderate Structure of Trump’s Tax Reform


It is important to know that Trump might go a bit soft on his aggressive stance over the tax reforms. With a defeat on his most hyped agenda in sight, Trump would not like another one of his moves to fail. Republicans would not be able get through this tax reform without the support of other congressmen. To get their votes, they might tone down their candid take on the reform.

Will Trump dilute his conservative stance on this tax to get the bill through? It will be interesting to watch the proceedings as the newly formed government tries to push its agenda.