Investment advisers like the thrust of Donald Trump's tax plan, but are wary of some of the specifics.
The billionaire real estate developer and Republican presidential candidate rolled out a plan Monday that would reduce the number of tax brackets to four — 0%, 10%, 20% and 25% — cap investment taxes at 20%, lower the corporate rate to 15% and eliminate most deductions and loopholes available to the “very rich.”
Advisers favor whittling down the complex tax system.
“It's been close to 30 years since we've had significant reform,” said Suzanne Shier, chief wealth planner and tax strategist at
Northern Trust. “It's time to revisit the code because the personal and business tax environment has changed significantly in that timeframe.”
Even though Mr. Trump has vowed to crack down on special tax favors for the wealthy,
his plan is generous toward the well to do, according to Austin Frye, chief executive of Frye Financial Center.
“The rich cats are going to make a lot of money on this,” Mr. Frye said.
(More: Jeb Bush tax plan would set investment taxes at 20%, eliminate deductions)
POLITICALLY MOTIVATED
But there is one way the wealthy will pay under Mr. Trump's plan that will catch advisers' attention. He would phase out the tax-free monetary build up within life insurance plans for high-income earners.
“Most rich people buy life insurance to avoid taxes,” said Paul Auslander, director of
financial planning at ProVise Management Group.
The controversial and often bombastic Mr. Trump sells himself to voters as a Washington outsider who is not a typical politician. But his tax plan strikes some advisers as a lightweight policy offering designed to attract votes.
“His tax plan is more politically motivated than reasonable,” said Shon Anderson, chief wealth strategist at Anderson Financial Strategies. “There are a lot of ideals that can be put to paper but not a lot of things that would come to fruition.”
Mr. Frye compared Mr. Trump to a sixth grader in a school election promising everyone free pizza at lunch with no plan to pay for it.
“I don't think he speaks about the revenue side to balance the budget,” he said.
(More: Advisers like Rubio tax plan's simplicity, but shudder at details)
SPUR GROWTH?
The
outline posted on Mr. Trump's website promises that “cutting every American's taxes will boost consumer spending, encourage savings and investment, and maximize economic growth.”
“I like the aspect of a lower rate that spurs growth,” said Michael Brady, president of Generosity Wealth Management. “But I don't have enough data about his assumptions to know if that growth will actually be there.”
In any case, Mr. Trump is proposing to do something that hasn't been done since the mid-1980s, according to Mr. Auslander.
“That tax plan would be the single greatest innovation since Ronald Reagan cut tax rates by more than half,” he said. “The whole tax system needs reform. If someone had the courage to do it, it would spur unprecedented growth.”
