White House Tax Reform Proposal – Light on Details (Non-residents and Expatriates are No Where to be Found)

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The White House announced on September 27, 2017 it’s so-called  Unified Framework for Fixing Our Broken Tax Code

Nowhere is there any discussion about the “expatriation” provisions; e.g., IRC Section 877, et. seq.    See, for instance,  Part II: C’est la vie Ms. Lucienne D’Hotelle! Tax Timing Problems for Former U.S. Citizens is Nothing New – the IRS and the Courts Have Decided Similar Issues in the Past (Pre IRC Section 877A(g)(4))

One important proposal that would impact (i) U.S. citizens residing overseas, (ii) long-term lawful permanent residents, and (iii) those who renounce/abandon such status; is the proposed repeal of the entire estate and gift tax regime (referred to “affectionately” in the report as the “death tax”).

The Tax Policy,  Urban Institute – Brookings Institute, Research report, A Preliminary Analysis of the Unified Framework has concluded that the elimination of the estate and gift tax provisions will cause a loss of federal revenues of $238 and $443 billion over the next two decades, respectively.  The overall loss of revenue impact, according to this study of the “Unified Framework for Fixing our Broken Tax Code” will be significant. The report provides in summary:

We find they would reduce federal revenue by $2.4 trillion over ten years and $3.2 trillion over the second decade (not including any dynamic feedback)

Separately, the Tax Foundation last year in 2016 did its own prelimiary anlaysis and concluded:

  • According to the Tax Foundation’s Taxes and Growth Model, the plan would reduce federal revenue by between $4.4 trillion and $5.9 trillion on a static basis. The amount depends on the nature of a key business policy provision.

Will any of these provisions get passed into legislation?  Only time will tell, but so far the White House and Republican controlled Senate and House have not been able to pass any major legislation to date.   Pundits who follow legislation in the Congress and this  President are not optomistic that large swaths of these general tax proposals will ever become law.

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