US President Donald Trump and congressional Republicans are releasing their proposed tax reform plan, which is said to revise the corporate tax rate, provide benefits for married couples, and reduce the number of tax brackets.
“We are here to announce historic tax relief for the American people,” Trump said at the rally in Indianapolis, Indiana, adding that the “outdated, complex and extremely burdensome tax code” is standing in the way of America’s economic recovery.
“This is a once-in-a-generation opportunity,” Trump said. “I’ve been waiting for this for a long time.”
Trump said he would not negotiate on the Republicans’ proposal to lower the corporate tax rate to 20 percent.
“I wanted to start at 15 (percent) so that we got 20 (percent) – 15 was so low we didn’t take in the revenue. But I wanted 15 so we got 20, 20’s my number so I’m not negotiating that number. I am not going to negotiate,” he added.
The standard deduction will be $12,000, or $24,000 for married taxpayers who file jointly, eliminating the so-called “marriage tax.” The plan leaves in place deductions for mortgage interest and charitable deductions.
The highest-earning Americans, who make more than $418,000 a year and previously filed at 39.6 percent, will find their rate reduced to 35 percent, plus a doubling of standard deductions.
One of the goals is a simpler tax code that would spur economic growth and make US companies more competitive. The US tax code has not been overhauled since 1986.
The number of individual tax brackets would shrink from seven to three, with rates of 12 percent, 25 percent, and 35 percent, with room for a fourth bracket for the wealthiest taxpayers.
Among the other proposals is a cut in repatriation taxes on offshore earnings, designed to give corporations a break on profits earned overseas. The move would allow corporations to bring back earnings to the US at sharply reduced rates. Full details have not been released yet.
Critics of the early announcement say the plan benefits big businesses and the rich because it would lead to a loss in revenue for the government which would mean further cuts to social programs and services. Many of the details are vague and will rely on the congressional tax-writing committees to craft legislation.
The tax cuts could cost the government $1.5 trillion in revenue over the next decade, according to Senator Bob Corker (R-Tennessee), as reported by The New York Times.
“Such a cut likely would ultimately hurt many Americans because the resulting increase in deficits and debt would raise the pressure for cuts in program that help low-and middle-income people or that produce long-term economic benefits,” according to the Center for Budget and Policy Priorities.
The nonpartisan Tax Foundation think tank estimated the tax reforms would reduce federal revenues by roughly $5 trillion over a decade, according to Reuters.
Trump is expected to push lawmakers to quickly approve his tax package, as it was a top campaign promise, and he and Congressional Republicans need a win, after the latest repeal and replace efforts to overturn the Affordable Care Act, before the midterm elections in November.
Republicans have said the tax cuts would be offset by new revenues raised from eliminating tax loopholes.