Predicting the priorities of the Donald Trump administration is a favorite parlor game in Washington and on Wall Street these days.
Though the President-elect will be coming into power with Republican majorities in both the House and the Senate, many of his most popular positions, like his hardline stances on trade and immigration, are not exactly popular with Congressional leadership.
This is not the case, however, when it comes to tax reform. Trump promised big tax cuts during his campaign, and as his platform evolved it came to look very similar to the sort of reform that House Speaker Paul Ryan has been pushing for for years now. Here are four charts that explain the Trump plan, and how the tax code could likely affect you starting next year:
The Trump plan simplifies the tax code, combining seven tax brackets into three while raising the threshold at which workers begin paying income tax. Many married couples will see a substantial reduction, as will wealthy taxpayers, with the top rate dropping from 39.6% to 33%.
One of the most important elements of the plan: Corporate taxes dive from 35% to 15%. The new rules would also allow pass-through entities, such as sole proprietors, to be taxed at this low rate rather than at the higher personal rate. According to the Tax Policy Center, the plan has no provision to “limit the number of employees who would redefine themselves as sole proprietors.” Dentists (and hedge funds), rejoice.
The cuts (plus the lack of commensurate budget reductions) would add $6 trillion more to the national debt relative to baseline projections.
Trump’s plans would lower taxes for most Americans but would raise taxes on some large families and single parents because of the elimination of some exemptions. Take-home pay for the top 1% of earners could rise substantially.
Graphic sources: Tax Policy Center; Congressional Budget Office
A version of this article appears in the December 15, 2016 issue of Fortune with the headline “Anatomy of a Trump Tax Cut.”
