President Donald Trump is seeking to cut the corporate tax rate to 15% and to make some changes to individual tax rates.
President Donald Trump on Wednesday rolled out a tax plan that proposes to slash corporate taxes and tweak personal tax rates but that excludes a tax on imports favored by some congressional Republicans.
The plan was announced by Treasury Secretary Steven Mnuchin and National Economic Council director Gary Cohn during a White House press briefing.
While the plan contains broad outlines rather than firm legislative text, Mnuchin and Cohn said the plan would include "the biggest tax cut" in US history, echoing statements made by Trump.
While Mnuchin did not apply a deadline to passing a tax plan, he told an event hosted by The Hill earlier Wednesday that the White House and congressional leaders wanted to pass a bill "as quickly as possible."
Here are the key points of the plan:
- Corporate tax rate of 15%: Such a rate would deliver on Trump's campaign promise; the current federal statutory rate is 35%.
- Allows pass-through rate for business owners: Instead of self-owned businesses being taxed at the personal income rate, business owners would have incomes from operations taxed at the 15% rate. So if you own your own business, income from that business would be taxed at the corporate rate. According to The Times, that could apply to the Trump Organization.
- No border-adjustment tax: The tax on imports was favored by House GOP leaders such as Speaker Paul Ryan and Kevin Brady, the chair of the Ways and Means Committee. Mnuchin said the White House talked to Ryan and Brady but thought the tax did not "work in its current form."
- A slight adjustment to individual tax rates: Mnuchin said the top income-tax rate would be in the "mid-30s," down from its current 39.6% level. According to a report from Bloomberg, White House officials said there will be three tax brackets with rates of 35%, 25%, and 10%, down from the current 7 brackets. Cohn told reporters that he did not have the exact incomes associated with the brackets.
- Double the standard individual tax deduction: This would allow individual filers to deduct their first $12,700 in income from their taxes and $25,400 for joint filers, as opposed to the current $6,350 for individuals and $12,700 for joint filers.
- A one-time repatriation tax: This would allow companies to bring back money from overseas to the US with a slightly lower, one-time tax. The White House did not clarify the rate at which this money would be taxed. President George Bush enacted a repatriation tax at a 5.25% rate in 2004, but studies show the money brought back mostly went to stock buybacks and dividends rather than hiring workers.
- Eliminate the estate tax: This would eliminate a tax on assets being transferred via a will after someone dies.
- A change in tax exemptions for the middle class: According to The Times, the plan will propose an increase in the standard deduction for individuals.
- Eliminate itemized tax deductions other than charitable donations and mortgage payments.
- Repeal 3.8% tax on net investment income: The tax was levied on "individuals, estates and trusts" with higher than a certain threshold in investment income. For instance, the threshold for an individual was $200,000 in investment income last year.
- Repeal the alternative minimum tax: This requires some people that have large amounts of deductions to calculate their income tax under the normal tax rate and the alternative and pay the higher amount. According to the Tax Policy Center, this was originally designed to eliminate large deductions by wealthier individuals, but not applies to roughly 5 million people.
- No infrastructure spending: Reports on Tuesday said Trump was considering including infrastructure spending in the plan to try to win over Democrats. Mnuchin denied the report in the speech, saying the proposal would be "just a tax plan."
Here's a one-page summary of the tax plan provided to reporters during a White House briefing:
Mnuchin said the bill would be paid for through economic growth. This uses a formula called dynamic scoring, which uses assumptions that gross domestic product will grow because of increased spending to make up revenue that is cut in the tax bill. The Treasury secretary told the crowd Wednesday that he expected sustained annual GDP growth of 3%.
President Donald Trump is seeking to cut the corporate tax rate to 15% and to make some changes to individual tax rates. Read Full Story
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