ATR Analysis of John Kasich Tax Plan

Posted by Ryan Ellis on Thursday, October 15th, 2015, 4:56 PM PERMALINK

Governor John Kasich today released his presidential campaign tax plan. Below is ATR's analysis.

For families. The current seven bracket system is replaced by a three bracket system and a top rate of 28 percent (the same top rate after President Reagan's 1986 Tax Reform Act). Tax deductions for charitable contributions and mortgage interest would be retained at current levels. The earned income tax credit is increased by 10 percent.

Capital gains and dividends rate cut . The capital gains and dividends tax is reduced from 23.8 percent today to 15 percent.

Death tax repealed. The 40 percent death tax is repealed entirely.

Business tax rates lowered. For corporations, the tax rate on profits is cut from 35 to 25 percent. For partnerships, S-corporations, sole proprietorships, and LLCs, the tax rate is cut from 39.6 percent to 28 percent. To make up for the slightly higher rate on flow-through firms, the research and development tax credit is doubled for smaller companies.

Full expensing. All business investments in plant and equipment will be deducted in full in the year of purchase. This will replace a long, multi-year deduction process in place today called "depreciation." No longer will the tax code say that a pencil can be deducted in one year, but a computer will take five years.

Territoriality. The U.S. is one of the only countries in the developed world which seeks to tax income earned in the United States as well as income earned overseas by U.S. companies. The Kasich plan transitions our "worldwide" tax system to the more typical and common sense "territorial" plan. Only income earned in the United States will be taxed by the United States.

In order to finance this transition, overseas deferred earnings will face a one time tax at a low rate.

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