President Donald Trump speaks during a meeting with members of the House Ways and Means committee in the Roosevelt Room of the White House, Tuesday, Sept. 26, 2017, in Washington.
GOP tax document reveals plan for massive tax cuts, preserves key deductions
Damian Paletta, Mike Debonis, The Washington Post
WASHINGTON — Republicans on Wednesday will propose slashing tax rates for the wealthy, middle class and businesses, while also preserving popular tax deductions that encourage buying homes and giving to charity, according to a nine-page document obtained by The Washington Post.
But the document, titled “Unified Framework For Fixing Our Broken Tax Code,” leaves many key questions unanswered. In it, the White House and Republican congressional leaders do not identify the numerous tax breaks that they say will be removed in order to offset some of the trillions of dollars in revenue lost by cutting tax rates.
The framework is being presented to Republicans and the public Wednesday as a starting point for negotiations on revamping the U.S. tax code. Congress must vote the changes into law, and Republican leaders are now tasked with resolving controversial questions to unite their party – and possibly some Democrats – behind tax legislation.
The tax framework would:
* roughly double the standard deduction to $24,000 for married families and $12,000 for individuals
* collapse the seven individual income-tax brackets to three, with rates of 12, 25, and 35 percent
* raises possibility of a higher tax rate for the wealthy, though this remains an open debate
* allow more people to qualify for the child tax credit
* creates a non-refundable credit of $500 for non-child dependents
* preserves mortgage and charitable deductions, but promises to gut many others
* proposes simplifying tax benefits for retirement, work, and higher education
* eliminate the estate tax and alternative-minimum tax
* cut corporate tax rate from 35 percent to 20 percent
* allow high-income businesses that pay through individual income tax code to pay 25 percent rate
* allow companies to expense investments in equipment and other capital for at least five years
* create new limits on interest expenses
* eliminate a domestic production deduction Republicans feel will no longer be necessary
* preserve research-and-development tax benefits
* the document does not mention eliminating carried interest tax benefits used by hedge fund managers
* allows multinational companies to exempt all dividends from foreign subsidiaries
* incentivizes companies to bring overseas assets back to the United States, though it doesn’t say what tax rate it will impose on this shift.
Analysis: Business owners win, deficit hawks lose
Stephen Ohlemacher, Associated Press
WASHINGTON (AP) — Small business owners, large corporations and the super wealthy could fare well under President Donald Trump’s tax plan. The middle-class could come out ahead, too, but the plan has too many holes to determine how individual taxpayers would be affected.
The plan would reduce the number of tax brackets from seven to three — 12 percent, 25 percent and 35 percent. But it doesn’t specify the income levels for each bracket. Those are important details, which will be sorted out by Congress.
Trump is scheduled to unveil his tax plan Wednesday at an event in Indiana. The plan was outlined by senior administration officials who asked for anonymity because they were not authorized to be quoted on the details of the framework ahead of the president’s remarks.
The plan has more winners than losers, largely because Trump is leaving it to Congress to figure out how to pay for it — or whether to pay for it.
Corporations. Trump’s plan would lower the top corporate income tax rate from 35 percent to 20 percent. This would be a huge tax cut for most corporations, even if their tax breaks are severely limited.
Business owners who report business income on their individual tax returns. This is the overwhelming majority of American businesses, from small mom-and-pop outfits to large partnerships. The top tax rate for these taxpayers is currently 39.6 percent. Trump’s plan would lower the top rate to 25 percent.
The superrich. Trump’s plan would eliminate the federal estate tax. Under current law, the first $11 million of an estate is exempt for a married couple, meaning only the wealthiest Americans pay it.
U.S.-based international corporations. Trump’s plan would end the U.S. practice of taxing the foreign profits of U.S.-based corporations. Under current law, the money is taxed if it is brought back to the U.S.
The middle-class — maybe. Trump’s plan would increase the standard deduction to $12,000 for individuals and $24,000 for a married couple, presumably eliminating the personal exemption. Under current law, the personal exemption is $4,050 and the standard deduction is $6,300, for a total of $10,350.
This provision would allow middle-class families to shield more of their income from taxation. However, it’s impossible to say how they would fare overall because Trump’s plan doesn’t specify the income levels for each tax bracket. Administration officials said Trump’s plan would be “at least as progressive as the current tax code.”
The national debt. Trump’s plan doesn’t include enough details to precisely project its impact on the government’s finances. But the rate cuts for businesses and individuals are sure to add to the nation’s mounting debt. Administration officials said the plan would not add to the debt, when economic growth is taken into account. However, many experts say the administration’s projections for economic growth are unrealistic.
Taxpayers who itemize their deductions. About 30 percent of U.S. taxpayers itemize their deductions. The rest take the standard deduction. Trump’s plan would eliminate most itemized deductions, with the exception of deductions for mortgage interest and charitable donations. If Trump’s plan became law, many of these taxpayers would probably start taking the larger standard deduction.
U.S.-based international corporations. They show up as winners and losers because Trump’s plan would impose a one-time tax on an estimated $2 trillion in foreign profits that U.S. corporations have invested overseas. Trump’s plan does not specify a tax rate, leaving it to Congress.