11 Ways President Trump's Tax Plan Could Affect Americans

Donald Trump's tax plan, explained.

There are at least two schools of thought when it comes to Donald Trump's tax proposal. Some say the promised tax cuts would greatly stimulate the economy because people would have more money to spend and reinvest it into the country. Others say the lack of revenue would vastly accelerate the government's debt and lead to anxious business markets and spiking interest rates for houses, cars and loans. Here's a rundown on how the plan could affect Americans.

Lowest tax brackets get a break.

No income tax on your first $25,000 if you're single, $50,000 if you're married, $37,500 if you're the head of the household. This standard deduction applies to all earners, says Kyle Pomerleau, director of federal projects at the Tax Foundation, a tax policy research organization. That could be huge -- or "yuuuge!" as Trump may say -- for those in the lowest tax brackets. The so-called marriage penalty and alternative minimum tax would be eliminated.

Reduced taxes for the next tax brackets.

You'd pay 10 percent if you're single and making 25,000-$50,000, or married in the $50,000-100,000 range, or a head of household making $37,501-$75,000. The higher income brackets (up to $150,000 single, $300,000 for married and $225,000 for head of households) would pay a 20 percent rate, and those earning more would pay 25 percent. "Those in the top 20 percent would see an average tax cut of $25,000, about 10 percent of their income," says Roberton Williams, a Sol Price Fellow at the Urban-Brookings Tax Policy Center.

15 percent corporate tax for all businesses.

"We have the third-highest corporate tax rate in the world with only the countries of Chad and United Arab of Emirates with higher rates," says Scott Cody, CFS and partner at Latitude Financial Group in Denver. "The world average corporate tax rate is roughly 24 percent and we are at 39 percent. This could help bring more jobs back and corporate dollars that are sitting offshore back to the U.S." Without safeguards, however, this plan could encourage people to become corporate entities instead of employees, Williams says.

Raised income limits on investments.

Today an individual earning up to $37,450 and married couple earning $74,900 would not have to pay long-term capital gains tax on their investment gains and dividends, Cody says. "Whereas with Trump's plan those income limits are raised to $50,000 for an individual or $100,000 for a couple, respectively," he says. "It's more generous and a little clearer under the proposed plan. This certainly encourages those folks to make these types of investments."

Some exemptions and deductions would disappear.

The tax plan says that with lower tax brackets, "current exemptions and deductions will become unnecessary." Although it's not specified which deductions would be eliminated, the plan says those in the 10 percent bracket will keep most of their current deductions, those in the 20 percent bracket would retain more than half of their deductions, but more would be eliminated for the 25 percent bracket. Also, special interest or corporate loopholes could be closed, but the plan doesn't specify. Charitable giving and mortgage interest deductions would remain.

Big benefits to the upper 5 percent.

"This is mostly going to be a reduction in the taxes paid by the upper 5 percent, partially because (they) pay such a big part of the taxes now," says Ross Levine, the Willis H. Booth chair in banking and finance at UC Berkeley's Haas School of Business. This could lead to less tax dodging and more investment, Levine says. On the negative side, he says, since the top 5 percent of earners pay 60 percent of the income tax, dropping their rate 15 percent could cause an "enormous" tax deficit.

Quick increase of government debt.

By many estimates, revenue would fall at a fast pace, 60 percent in 10 years, Levine says. Meanwhile, the national debt increase would be $1 trillion per year and $9.5 trillion to $12 trillion in the next decade, according to Tax Policy Center and the Tax Foundation, respectively. The proposal would add $34.1 trillion to the national debt by 2036, the Tax Policy Center says. The current national debt is about $19 trillion.

Higher interest rates for borrowers.

Vastly higher debt would likely mean higher interest rates for consumers and businesses, Levine and Williams say. "If I were lending money to the U.S. and I saw the U.S. adopt a policy for (debt) to increase by over 60 percent in the next decade at a time when the country's demographics are also aging, it would make me quite nervous about lending money to the federal government and it would make me nervous about the future economic prosperity of the U.S.," Levine says.

Government programs could be at risk.

Since Trump says he'll work to keep Social Security, Medicare and Medicaid intact -- which is about two thirds of the budget -- and increase military spending -- about half of the remaining budget, "he's down to just the non-defense discretionary spending," Williams says, which isn't enough to cover the debt. The shortfall might mean cutting discretionary services, such the Postal Service, military, education and commerce, Pomerleau says. The goal is the economy will grow so much from the tax cuts that there won't be a deficit.

Growth in small business sector.

Tax breaks and access to funds would help small businesses, says Joseph Bucci, business, leadership and management department chairman at Regents University. After the financial crisis, small business loans have been hard to get. "You want businesses to expand, get new equipment, hire new people, people pay taxes," Bucci says. But critics say there's little evidence tax cuts lead to growth. "Take a look at the George W. Bush administration," Williams says. "They cut taxes substantially over the eight years and the economy didn't grow much at all."

Incentives to come back to America.

Companies holding cash overseas will have a one-time repatriation of a significantly discounted 10 percent tax rate, followed by an end to the deferral of taxes on corporate income earned abroad. "He's trying to say, you know, don't be afraid of bringing that money back into the country," Bucci says. "Because that will certainly help the economy and the investments in the U.S. And he's got to incentivize that a little bit." Critics say this wouldn't go far enough to cover the deficit and may prompt firms to seek more incentives.

Christine Giordano is a freelance business journalist with a passion to help consumers make educated decisions. Also a columnist for Newsday, you can follow her on Twitter @chrisgiordano.