Some people love him. Some people hate him. Regardless of what anyone feels about him, New York City real estate mogul and TV reality show star of The Apprentice Donald J. Trump has been sworn in as the president of the United States.
While some of the new president’s proposals have, at times, lacked specificity, anyone seeking some level of certainty in the immediate future can find it in the fact that the United States will have a sitting Republican president acting with the full power of a Republican-majority House and Senate behind him. Trump has an opportunity to get a lot done, at least during his first two years in office. What he chooses to spend that valuable time on remains to be seen, but tax reform is on the expected short list. What might that look like?
Under Trump’s proposed tax plan, the estate tax will be repealed, carried interest will be taxed at ordinary income levels, the personal income tax brackets will be consolidated and the top rate will drop more than six points to 33 percent, and the corporate tax rate will drop 20 points to 15 percent (according to the tax plan listed on Trump’s campaign Web site). The 3.8 percent Net Investment Income Tax will be repealed, as will the Alternative Minimum Tax.
According to the Tax Foundation, a right-leaning think tank, after accounting for the larger economy and the broader tax base, Trump’s plan would reduce revenues by $2.3 to $5.9 trillion over the next decade, depending on the nature of a key policy provision for pass-through entities.
The Tax Foundation notes that its analysis does not take into consideration whether or how the revenue loss would be financed, nor what economic and social policies the Trump administration might propose that would have a direct or indirect impact on the economy. The left-leaning Tax Policy Center estimates that number to be as high as $6.2 trillion before accounting for added interest costs. To provide some frame of reference, the current proposed budget deficit is about $500 billion and the total gross national debt is nearly $20 trillion.
Obviously, any changes to federal tax law require congressional approval. While CPAs may believe that their role in sorting out tax reform doesn’t start until the law is passed, it actually begins much earlier than that. Here’s what CPAs can do right now to ensure that they not only fulfill their obligation to their clients, but to their country:
1. Read Trump’s economic plan. Then read what others are saying about it. Don’t stick to your favorite publications or trade magazines; seek out the opposing point of view. Read both left- and right-leaning analyses of the proposals, such as from the Tax Policy Center and the Tax Foundation. Read research studies and reports issued by the Government Accountability Office or the Congressional Budget Office, both government entities that provide nonpartisan, factual analyses.
2. Form your own opinion. You are a CPA. Your education and training have equipped you with the tools to conduct your own objective analysis. Use those tools to determine which parts of the plan are sound and which ideas or proposals should be relegated to the rubbish bin.
3. Share your well-formed opinion. Sure, you can share it with your fellow CPAs —The CPA Journal and Tax Stringer are two options — but consider a larger audience. Reach out to your congressional representatives; write your local paper. If writing is your forte, launch your own blog. Get your sound and informed analysis out there.
4. Keep reading. Plans change. Bills are carved up and negotiated, compromised and rewritten. What is finally voted on may not look anything like what was originally proposed. Find writers who offer thoughtful, objective analysis that you may not always agree with but that you trust as well-researched and accurate.
5. If you’ve gotten this far, get more involved. Volunteer your service and expertise to one of your community’s nonprofit boards of directors. Run for local office. Share your gifts of objectivity and accuracy with groups outside of your employer or clients.
We are living in a world where the proliferation of fake news Web sites and the reported meddling of foreign actors are weakening our election process. It does not matter where on the political spectrum you fall; your skills and competencies as CPAs can be used to better our democratic society and its institutions. Committing yourself to any one of the above tasks will help protect them.
This article originally appeared in the December 2016 issue of The CPA Journal.