The Trump administration on Wednesday released the outlines of what it called “the biggest tax cut” in US history — a plan that included huge cuts for businesses and the elimination of deductions for state and local income taxes for individuals.
In a White House briefing, Treasury Secretary Steven Mnuchin and national economic director Gary Cohn offered some details of the sweeping reform plan.
“We are going to cut taxes and simplify the tax code by taking the current seven tax brackets we have today and reducing them to only three brackets: a 10 percent bracket, a 25 percent bracket and a 35 percent bracket. We’re going to double the standard deduction. So that a married couple won’t pay any taxes on the first $24,000 of income they earn. So in essence, we are creating a zero tax rate, yes, a zero tax rate for the first $24,000 that a couple earns,” Cohn said.
The plan would also eliminate the federal income-tax deduction allowed for state and local taxes — a provision that would hit high earners in high-tax states, including New York, New Jersey and Connecticut.
The only itemized deductions that would be preserved under the plan would be for home mortgage interest and charitable contributions.
The plan would also repeal the so-called “death tax,” the alternative minimum tax and the 3.8 percent tax on investment income from ex-President Obama’s health care law.
“The threat of being hit by the death tax leads small business owners and farmers in this country to waste countless hours and resources on complicated estate planning to make sure their children weren’t hit with a huge tax when [they died]. We are going to eliminate most of the tax breaks to high-income individuals. Homeownership, charitable giving and retirement savings will be protected, but other tax benefits will be eliminated,” he said.
Mnuchin said cuts for businesses would be even steeper.
“Under the Trump plan, we will have a massive tax cut for businesses and massive tax reform and simplify indication. As the president said during the campaign, we will lower the business rate to 15 percent. We will have a one-time tax on overseas profits which will bring back trillions of dollars that are offshore to be invested here in the United States to purchase capital and to create jobs. This is not just about large corporations: Small and medium-sized businesses will be eligible for the business rate as well,” he said.
President Trump also wants to allow private and “pass-through businesses” like his own real estate empire to file like corporations.
That could reduce his own taxes, as he would only have to pay the 15 percent business rate instead of the top 39.6 percent personal rate that now applies.
But Mnuchin said the plan won’t allow the wealthy to take advantage of the 15 percent rate for small businesses.
”What this is not going to be is a loophole to let rich people” cash in, he said earlier on CNBC, without offering details.
The plan — which will have to get through Congress and likely will undergo changes — would also allow US companies that have stashed $2.6 trillion overseas to bring back profits at a tax rate of 10 percent instead of 35 percent.
The plan won’t include a new tax on imports, a favorite idea of House Speaker Paul Ryan’s that was expected to bring in $1 trillion to finance lower tax rates.
And Team Trump insisted their plan didn’t have to reduce the deficit — a Trump pledge on the campaign trail — because projected economic growth would increase tax revenues.
Ryan said Republicans have a consensus on the goals and aims for reducing tax rates.
”We’re in agreement on 80 percent, and then that 20 percent, we’re in the same ballpark,” Ryan said.
Democrats said a 15 percent corporate rate won’t fly.
Trump’s tax plan came just three days before he marks his 100th day in office, a traditional touchstone for measuring a new president’s performance.
Trump has called the benchmark “ridiculous,” but nonetheless he and his administration have been scrambling feverishly to get a win — or at least a perception that can be spun as a win — on the board.
Mnuchin briefed congressional Republicans on the plan at the Capitol late Tuesday, during which they were told that Trump’s blueprint will omit the border adjustment tax that Ryan and his allies had championed.
A GOP source involved in the meeting said “there is real and growing optimism” about the president’s plan and the impact it will have on the economy.
[From an article published by The NEW YORK POST]
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