The White House unveiled a plan Wednesday that would comprehensively reform the U.S. tax code by eliminating most deductions and simplify the system by classifying taxpayers from the current seven tax brackets into just three brackets.
Provisions of the plan include cutting the top personal income tax rate from 39.6 percent to 35 percent and doubling the standard deduction for taxpayers to $24,000. The plan would also cut the current 35 percent corporate tax rate nearly in half, lowering it to 15 percent for corporations and most small businesses.
During an executive-order-signing ceremony, President Trump said, “It’s a great plan. It’s going to put people back to work.”
Presented as an outline of principles with few details, the White House plan fulfills many of Trump’s campaign pledges and is designed to be the genesis of a major push to pass a comprehensive tax reform package in 2017.
“Tax reform is long overdue,” National Economic Council Director Gary Cohn told reporters at the White House. “We have a once-in-a-generation opportunity to do something really big.”
Some of the principles resemble the House Republicans’ plan, though the outline does not include a contentious border-adjustment tax that would fund the reforms by imposing a new import tax.
Taxes that mostly affect wealthy Americans, such as the alternative minimum tax for individuals and the estate tax, would be repealed by the plan which would also “eliminate targeted tax breaks that mainly benefit the wealthiest taxpayers.”
Another provision of the plan would allow “tax relief for families with child and dependent care expenses,” an idea advocated by Ivanka Trump.
Other facets of the plan include a one-time tax on corporate profits overseas that would allow companies to repatriate funds to the United States, something economists believe would encourage new investments.
Treasury Secretary Steven Mnuchin asserted that the plan would eliminate all tax deductions for individuals except mortgage interest and charitable tax deductions.
Mnuchin and Cohn did not specify how much revenue would be generated to pay for the plan, nor whether companies would voluntarily repatriate earnings to be taxed or if taxes would affect all earnings overseas. Such details will ultimately be decided by Congress.
Trump did not appear at the announcement of the tax plan whose “principles” were praised by Republicans who contended that they “will serve as critical guideposts for Congress and the administration as we work together to overhaul the American tax system.”
“Lower rates for individuals and families will allow them to keep more of their hard-earned money and empower them to invest more in their future,” Speaker Paul Ryan (R-Wis.), Senate Majority Leader Mitch McConnell (R-Ky.) and the heads of the House and Senate tax-writing committees said in a joint statement. “Getting tax rates down for American companies, big and small, will create new jobs and make the United States a more inviting place to do business.”
Democrats criticized the plan as a tax cut for the rich that will aid Wall Street. They also claimed that the plan could personally benefit Trump, citing a portion of his 2005 tax returns, which were obtained by MSNBC. If there was no alternative minimum tax, Trump would have saved millions.
Liberals also used the occasion to again insist that Trump to release his tax returns.
“The president has no intention,” Mnuchin said. “The president has released plenty of information and I think he has given more financial disclosure than anybody else.”
H/T: The Hill
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