Article content continued

President Trump’s tax cuts are more dramatic and reach further. His plan calls for a reduction in the number of U.S. federal income rate brackets from the current seven brackets to only three: 10 per cent, 25 per cent and a top rate of 35 per cent. That top rate is down nearly 5 points from the current top rate of 39.6 per cent.

By comparison, in Canada, for 2017, we have five federal tax brackets: zero to $45,916 (15 per cent), $45,916 to $91,831 (20.5 per cent), $91,831 to $142,353 (26 per cent), $142,353 to $202,800 (29 per cent), with anything above that being taxed at 33 per cent.

You’ll recall that in Canada, our middle-income tax cut is being paid for by that new 33 per cent high-income bracket, which represented a four percentage point increase (from 29 per cent) in our top rate, applicable to Canada’s top 1 per cent of income-earners. Mr. Trump, on the other hand, is lowering the top U.S. rate by nearly 5 per cent, although how he plans to pay for this and the other tax cuts announced as part of his plan is anyone’s guess.

Tax exemptions

Under the U.S. personal tax system, filers can choose to claim either a “standard deduction,” or choose to “itemize” and claim various eligible expenses, such as medical expenses, charitable donations, mortgage interest expense and even state and local taxes paid, as deductions from their income. Taxpayers can choose whichever filing method results in the least amount of tax owing.

The tax plan announced this week called for a doubling of the “standard deduction,” which is currently US$6,350 for a single person or US$12,700 for a married couple filing jointly. As national economic director Gary Cohn said at the White House briefing on Wednesday, “in essence, we are creating a zero tax rate, yes, a zero tax rate for the first $24,000 that a couple earns.”