[dzlobin]

The proposal seems to state that pass-through entities will be subject to the 15% tax rate as well. From what I've read so far that would seem to mean that all business income from one's LLC would be taxed at 15%, and there wouldn't be any personal income tax to pay on top of that.

[tptacek]

That seems improbable, because LLC owners usually recognize all of their income as pass-through distributions; this would be akin to a capped 15% tax on all wealthy people.

The reason you can propose drastically cutting the corporate tax is that it's a tax on money that is again taxed as income when it reaches households. The whole point of an LLC is not to do that.

LLCs that retain lots of income in the corporation indefinitely can elect corporate taxation, to which the proposed reduced rate would presumably apply. But when the LLC distributes that money back to its members, it is again taxed as income. In any case, that may be the basis for this proposal applying to LLCs.

[dzlobin]

100% agreed, which is why I was pretty surprised to read that in the article but we'll see if that's actually the intended understanding of this proposal.

For reference, here is the excerpt: "Beyond cutting the tax rate to 15 percent for large corporations, which now pay a rate of 35 percent, Mr. Trump also wants that rate for a broad range of firms known as pass-through entities — including hedge funds, real estate concerns like Mr. Trump’s and large partnerships — that currently pay taxes at individual rates, which top off at 39.6 percent."

Their specific mention of pass-through entities might mean that literally but it might have just been a more succinct way to group LLCs, LPs, and PLLPs.

[joshuaheard]

I don't know where the NY Times gets that. It's not mentioned in the actual text of Trump's plan:

http://www.marketwatch.com/story/full-text-of-trump-administ...

[tptacek]

That's the précis the White House gave to journalists. The WSJ covered this in more detail. Either way: don't hold your breath for an (absurd!) 15% cap on people who make money through LLCs.

[tmaly]

This would be great. When I was doing small side consulting work outside my day job, I would have to pay 1/3 of my net revenue in taxes. I always thought that was very steep if you only making a few thousand on the side.