US President Donald Trump on Wednesday presented his tax reform plan, an ambitious proposal that includes lowering the corporate tax rate from 35 per cent to 20 percent.
The reform plan also eliminates the estate tax and reduces the number of tax brackets for individuals from seven to three: 12 per cent, 25 per cent and 35 per cent.
The plan, entitled the “Unified Framework For Fixing Our Broken Tax Code,” was announced jointly by the White House and Republican lawmakers heading the House and Senate Ways and Means Committees and is the working document whereby the administration is seeking to craft the biggest US tax reform since 1980.
Trump’s proposal reduces the corporate tax rate from 35 per cent to 20 per cent, a little higher than the 15 per cent that the president had initially promised, Efe reported.
“Too many in our country are shut out of the dynamism of the US economy, which has led to the justifiable feeling that the system is rigged against hardworking Americans,” the nine-page plan states.
“With significant and meaningful tax reform and relief, we will create a fairer system that levels the playing field and extends economic opportunities to American workers, small businesses, and middle-income families,” it adds.
The three new individual tax brackets would shave the taxes that people in the current highest bracket — 39.6 per cent — pay and slightly raise the minimum percentage income tax to 10 per cent.
As had been previously announced, Trump is proposing to raise tax deduction amounts for families with children and create a new deduction for dependent adults such as the elderly or ill.
The president’s plan also eliminates the estate tax on inherited assets, known as the “death tax,” something that the White House had already announced, and it raises the standard deduction for individuals from $6,350 to $12,000 and for couples from $12,700 to $24,000.
It also eliminates most itemised deductions with the only deductions specifically preserved in the plan being those for charitable gifts and home mortgage interest.
It remains to be clarified how the tax cuts will be compensated for to balance the public accounts and avoid raising the deficit.
The president is traveling to Indianapolis on Wednesday to discuss the tax plan.
The tax reform proposal is Trump’s big legislative play for the remainder of the year after the apparent failure to repeal and replace ObamaCare, which the Republicans have been unable to move forward on despite holding majorities in both the House and Senate.