Pass-Throughs? AMT? Here Are the Tax-Reform Terms You Need to Know
U.S. Department of the Treasury Internal Revenue Service 1040 Individual Income Tax forms for the 2015 tax year are seen in this arranged photograph taken in New York on Feb. 17, 2016.
Photographer: Michael Nagle/BloombergFew topics in Washington lend themselves to jargon as readily as taxes. President Donald Trump’s drive for tax cuts, though only beginning, is already sending people diving for their dictionaries. Here are some of the terms worth understanding.
Like most nations, the U.S. levies a graduated federal tax on the net profits of corporations. Since 1993, the top rate has been 35 percent, among the highest in the developed world. (It grows to 39.1 percent when state and local taxes are included). Thanks to deductions and credits, few companies pay that amount: In 2012, the effective rate was about 19 percent, according to the Congressional Budget Office. Trump’s stated goal was to slash the top rate to 15 percent, though he may have to settle for something closer to 20 percent.