Trump's proposed tax plan is both incredibly remarkable and disruptive.
A few things about Trump's tax plan stand out. Here are three main keys to understanding how it impacts your financial future and personal savings plan.
Let's Start With My Favorite Criticism of Trump's Proposed Tax Plan
The Wall Street Journal quoted Lilly Batchelder, a former Obama Administration aide who now teaches at New York saying, "This plan could have been written on a napkin and the changes could have been written on the business card. This is an effort to create some buzz in the first 100 days but not propose any meaningful differences to the tax plans."
But, I find relief hearing the plan is simple and more straight forward.
Today, you have to spend years studying taxes to hold a basic tax job.
And still, 10 different accountants can each have a different situation to approach taxes. Why are we making taxes so complicated all the time? There's a problem here.
Here's a simple explanation to a very simple plan.
The 3 Big Keys To Understand What Trump Is Suggesting In The New Tax Plan:
1. This tax plan would reduce income tax brackets down to three unique brackets.
2. The plan would repeal the estate tax.
3. The plan would cut the tax on businesses to 15%.(Currently at 40%.)
(If you want further explanations on what this means the audio file from the show expands on this at 3:40 - Listen above.)
Maybe that doesn't Sound that simple, yet.
Here's what it means for your finances.
Most businesses will see an 11% drop in the taxes they pay.
The belief is that if the United States dramatically reduces business taxes, businesses will hire more people and an increased amount of jobs will come back to the U.S.
While businesses/business owners will see an immediate benefit, if you are working in a job getting a W2, you probably won't see a big change. You'll likely be in the same bracket you are in now.
The Flip Side: By cutting taxes, The country's revenue is decreasing which means we are growing our national deficit.
This is true - we are spending money we don't have but, we can't solve the national deficit by being the highest taxed country in the world. More than 50% of our country's budget goes toward government programs that nobody is willing to touch.
Legislative changes are coming and this is where the tax plan impacts you the most.
because There is more to come...
Your Personal Financial Plan & The Legislative Changes That Are Coming...
There is a BIGGER takeaway than wrapping your head around the new tax plan.
Today's successful financial planners will build in flexibility.
Legislative changes will come along and change the whole picture of financial planning. This tax plan is a good change and it still will impact how you plan for the future.
A lot of you have spent a lot of time and money in creating a financial portfolio that may suddenly be obsolete or dramatically changed.
Even now, congress is talking about doing away with pre-taxed 401K contributions.
You have to build a plan that works if the legislation stays the same and will continue to work even if legislation changes.
Now, What Do You Do Next?
We know there are significant changes coming.
Ask yourself, "Is your financial portfolio ready for dynamic changes in legislation?"
If you want to grab a coffee, jump on skype or have a phone conversation with a professional personal financial planner, our team would love to give you honest feedback.
We love to to review financial plans and help individuals and families be prepared for tax changes and larger scope legislation shifts. Our goal is to help people enjoy their life more and focus less on the worry around money.
Reach out below to begin a conversation.