The Promise of Tax Reform

Reuters

The personal exemption would also be removed, but the standard deduction would be increased.

In a document obtained by The Associated Press on Wednesday, they outline a blueprint for nearly doubling the standard deduction for married taxpayers filing jointly to $24,000, and $12,000 for individuals. On Sunday, as he was about to board Air Force One in New Jersey, Trump told reporters he hoped to see the corporate tax rate lowered to 15 percent, a level that his own negotiators had privately dismissed weeks ago.

The proposal will call for slashing the corporate tax rate to 20 percent from 35 percent, doubling the standard deduction for individual taxpayers and slightly increasing the bottom tax rate to 12 percent from 10 percent, according to two officials briefed on the details of the blueprint.

Trump's tax reform team - which includes House speaker Paul Ryan, Senate majority leader Mitch McConnell, National Economic Council director Gary Cohn, Treasury secretary Steven Mnuchin, Senate Finance Committee chairman Orrin Hatch, and House Ways and Means Committee chairman Kevin Brady - has its work cut out. Administration officials said Trump's plan would be "at least as progressive as the current tax code". It lacks critical details about the many tax breaks the White House and Republican congressional leaders want to eliminate to offset some of the trillions of dollars in revenue that would be lost through tax cuts. This means that the current 35 percent rate would fall to 20 percent. The AMT is essentially a tax floor for wealthy people who's access to numerous obscure deductions would otherwise allow them to pay a lower tax rate than the average American.

The deductions for mortgage interest and charitable contributions would be preserved, but could be scaled back. Naturally, Democrats are even less supportive, opposing such tax cuts by a staggering 33-62 margin.

The New York Times reported that Republican leaders in the House and Senate have agreed on the proposal. The most notable is the deduction for payment of state and local taxes, which would be a big hit to residents of states with high taxes and wealthy residents.

In addition to the slight uptick for the lowest tax bracket, the Republican plan is expected to propose lowering the top individual tax rate to 35% from 39.6%.

wTrump promised after meeting with lawmakers on Tuesday that "we will cut taxes tremendously for the middle class".

"We're going to introduce a tax plan that's the largest tax cut, essentially in the history of our country", President Donald Trump said Wednesday outside the White House.

Trump had initially pushed for cutting the 39.6 percent corporate tax rate to 15 percent.

Reduce individual income tax rates: The framework shrinks the number of tax rates to just three from seven today.

Republicans are unified in their desire to pass tax reform after failing so far to repeal the Affordable Care Act, one of the party's other big legislative agenda items.

The tax plan will likely be revealed in the next coming weeks, but Congressional tension is already brewing across the political divide. "It gives a massive tax cut to the wealthiest American households at the expense of the middle class".

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