Everything We Know So Far About What 2017 Taxes Will Look Like Under Trump

Donald Trump's plan to repeal and replace the Affordable Care Act didn't get off the ground, so now he and his team are shifting focus to another of his tentpole campaign promises: Tax reform. Here's what you need to know about Trump's tax plan.

Image Credit: Mario Tama/Getty Images News/GettyImages

Lowering taxes across the board

During the campaign, Trump said he plans to completely eliminate the income tax for individuals who make less than $25,000 a year and for couples who make less than $50,000 a year. According to his plan, this will eliminate the income tax entirely for more than 73 million households.

Under Trump's plan, the highest tax rate would be 25 percent and would affect individuals who earn $150,001 and up. By comparison, the 2016 tax bracket maxes out at a 39.6 percent tax for single filers in the highest income bracket (those earning $415,050 or more a year). This means that while there would be cuts to taxes for the poorest Americans, there would also be major cuts for the richest Americans, too.

Simplifying the tax brackets

Trump has also said he plans to simplify the tax bracket system. Right now, there are seven tax brackets in the U.S. Under the Trump plan, there would just be four, which would pay 0 percent, 10 percent, 20 percent, and 25 percent.

Cutting taxes for businesses

A key pillar of Trump's tax plan is to cut taxes for businesses. Trump believes this will incentivize more companies to conduct business in America, rather than outsourcing and then importing their goods into the United States after the fact. Right now, the Federal corporate tax ranges from 15-35 percent, but Trump plans to cut that significantly, with a max tax of 15 percent on business income.

"No business of any size, from a Fortune 500 to a mom and pop shop to a freelancer living job to job, will pay more than 15% of their business income in taxes," according to Trump's tax reform plan.

As Forbes notes, however, this change will benefit big corporations more than smaller business and mom and pop companies.

The reason? The Trump plan doesn't include "flow-through" firms like "partnerships, Subchapter-S corporations, sole proprietorships, and LLCs," Forbes explains. For those companies, the tax rate could be as high as 33 percent.

Democrats oppose the plan because it favors the wealthy

Trump will face major opposition from Democrats in Congress, who don't see his plan as beneficial for poorer Americans.

"The president campaigned as a populist against the Democratic and Republican establishments. But he's been captured by the hard right wealthy special interests," Senate Minority Leader Chuck Schumer told ABC News' George Stephanopoulos on This Week. "If they do the same thing on tax reform, and the overwhelming majority of the cuts go to the very wealthy, the special interests, corporate America, and the middle class and poor people are left out, they'll lose again."

It may actually hurt the economy in the long run

While it's true that Trump's plan might lead to economic growth and more job opportunities in the short term, by 2024 economists project the impact would be negative.

"In the short run, Trump's tax plan reduces taxes on business and higher income Americans, boosting investment and work, which results in more economic growth. However, in the long run, the Trump tax plan increases federal debt more than current policy, resulting in less economic growth," according to an analysis by the University of Pennsylvania's Wharton School in collaboration with the Tax Policy Center.