Trump Proposes the Most Sweeping Tax Overhaul in Decades
On the individual side, the plan would collapse the tax brackets from seven to three, with tax rates of 12 percent, 25 percent and 35 percent, the president said. The current top rate is 39.6 percent and the lowest rate is 10 percent. The framework also gives Congress the option of creating a higher, fourth, rate above 35 percent in the tax plan to ensure that the wealthy are paying their fair share.
The plan aims to simplify and cut taxes for the middle class by doubling the standard deduction to $12,000 for individuals and to $24,000 for married couples filing jointly. That would allow people to avoid a complicated process of itemizing their taxes to claim various credits and deductions. It would increase the child tax credit from $1,000 to an unspecified amount, and create a new $500 tax credit for non-child dependents, such as the elderly.
Provisions such as the alternative minimum tax and the estate tax, a levy on inherited wealth that Mr. Trump has derided for years, would be gone under the Republican proposal.
The proposal calls for reducing the corporate tax rate to 20 percent from 35 percent, a shift that supporters say is needed to make American companies more competitive with their counterparts around the world.
A new tax rate of 25 percent would also be created for so-called pass-through businesses, such as partnerships and sole proprietorships, which are currently taxed at the rate of their owners. About 95 percent of businesses in the United States are structured as pass-throughs and they generate a majority of the government’s corporate tax revenue.
“This will be the lowest top marginal income tax rate for small and midsize businesses in this country in more than 80 years,” Mr. Trump said.
While Republican leaders claim to be united on the tax plan, they must now sell it to lawmakers who have been deeply divided this year. The push began at a House Republican retreat on Wednesday at Fort McNair in Washington, where Representative Kevin Brady of Texas, the Republican chairman of the Ways and Means Committee, walked members through the blueprint and talked about the importance of coming together to fix the tax code.