Following the failure of his healthcare reform bill, markets have reacted cautiously to the announcement of President Trump’s tax reform. Described as the biggest tax reform since 1986, the reform is intended to fuel growth in the American economy.

Key Points From The Plan

The proposed revisions to the tax code would reduce the current seven wage brackets to three, with rates of 10%, 25%, and 35%. The proposed rates differ from the rates used in his election campaign and the document highlighting the reforms, which has provoked criticism for being only one page long, doesn’t explain precisely where each wage bracket will fall.

The reforms would see the top wage bracket increased from 33% to 35% while the bottom wage bracket would be reduced to 10% from the originally slated 12%. Under the new reforms, the standard deduction would also be significantly altered.

Gary Cohn, leading Trump’s National Economic Council, said that “We are going to double the standard deduction so a married couple wouldn’t pay any taxes on the first $24,000 income they earn. So in essence, we are creating a zero-tax rate – yes, a zero-tax rate – for the first $24,000 that a couple earns”.

During his campaign, Trump suggested that itemized deductions would be capped at $100,000 for single filers and $200,000 for married couples. However, the new plan doesn’t refer to any caps beyond saying that the administration intends to “eliminate targeted tax breaks that mainly benefit the wealthiest taxpayers”.

According to the reform plan, tax breaks for charitable giving, mortgage interest, and retirement savings would remain in place though the deduction for state and local taxes would be eliminated. In all, the deduction referred to as the SALT deductions, would be the largest federal tax expenditure, estimated to cost around %96 billion in 2017 and $1.3 trillion over the 10 years between 2017 and 2026. Currently, over 50% of taxpayers, who earn above $75,000, claim SALT deductions on their federal income tax returns, as do more than 90% of taxpayers who earn above $200,000.