Businesses, the wealthy and average taxpayers are likely to have more money in their pockets under President Donald J. Trump's tax proposal, financial advisers anticipate.
A list of goals for the tax overhaul, unveiled Wednesday by Mr. Trump's top economic adviser Gary Cohn and Treasury Secretary Steven Mnuchin, includes the aim to simplify and lower individual taxes.
The preliminary plan proposes condensing the existing seven income-tax rates to just three, cutting the individual top rate to 35% from 39.6%. The lowest rate would remain at 10% and the middle rate would be 25%. It would also end a 3.8% net investment income tax that applies only to individuals who earn more than $200,000 a year, repeal the alternative minimum tax and eliminate the estate tax, which currently applies only to estates worth more than $5.49 million for individuals and $10.98 million for couples.
During last year's presidential campaign, Mr. Trump foreshadowed his effort to achieve a streamlined tax code with three brackets. He's adding to that a big increase in the standard personal deduction.
"For the middle-income client not taking a lot of deductions, it might give them excess discretionary income," said Marc Lowlicht, chief executive of Opes Private Wealth Management.
It would also provide advisers more flexibility in their recommendations.
"If they're getting a tax cut, you may be more willing to have an income-oriented portfolio because the tax on that income would be less," said Tim Steffen, director of financial planning at Robert W. Baird & Co.
At the same time, the plan would eliminate the federal income-tax deduction allowed for state and local taxes — a provision that would hit high earners in high-tax states, including New York and New Jersey. The only itemized deductions that would be preserved under the plan would be for home mortgage interest and charitable contributions.
"This is going to be the biggest tax cut and the largest tax reform in the history of our country," Mr. Mnuchin said at the Newseum in Washington on Wednesday morning. "Tax reform is a major priority to boost the economy. We are committed to seeing it through."
Reducing tax-filing headaches also is one of Mr. Trump's motivations.
"For most Americans, we believe they should be able to do their taxes on a large postcard," Mr. Mnuchin said.
The administration's plan also calls for slashing the federal income-tax rate to 15% for corporations, small businesses and partnerships of all sizes. It also imposes a one-time tax on about $2.6 trillion in earnings that U.S. companies have parked overseas.
Implementing a corporate tax rate of 15% for both traditional corporations and so-called pass-through enterprises that are operated off the personal tax return of their owners will be a boon for many business owners.
"For the ultrahigh-net-worth client, that's going to free up a lot of capital," Mr. Lowlicht said.
But a lot of details about how business income is declared will have to be worked out.
"It will be interesting to see how they apply that at the individual taxpayer level," Mr. Steffen said.
Mr. Trump will get resistance from Democrats on the pass-through proposal.
"We don't need a tax plan that allows the very rich to use pass-throughs to reduce their rates to 15% while average Americans are paying much more," Senate Minority Leader Chuck Schumer, D-N.Y., said in a floor speech. "That's not tax reform, that's just a tax giveaway to the very, very wealthy that will explode the deficit."
Although Democrats will push back, Mr. Trump is starting out in general sync with Capitol Hill Republicans. The House GOP is pursuing its own tax-reform blueprint.
"Both of them are leaning toward lower rates and a broader tax base with limits on itemized deductions," said Howard Wagner, managing director of national accounting firm Crowe Horwath.
But Mr. Trump may run into problems even with Republicans if he chooses not to pay for tax cuts.
"If this is not a revenue-neutral proposal, it's going to be a real challenge," Mr. Steffen said.
Mr. Mnuchin said tax reform is part of the Trump administration's strategy to achieve 3% annual economic growth, which it might argue will finance the tax overhaul.
Mr. Lowlicht is optimistic that the corporate and personal deductions will boost the economy.
"You're going to have earnings expansion almost by default," he said. "That bodes well for domestic GDP."
Bloomberg News contributed reporting to this story.