Trump, GOP to unveil massive tax-cut plan
The blueprint, which party leaders are set to release and promote Wednesday during speeches and meetings, moves Trump and Republicans in Congress a step closer to a top policy goal. But by leaving decisions on which tax breaks to strip away to be negotiated later, they also are delaying controversial choices that could sink the party’s tax effort.
“We’ll be releasing a very comprehensive report,” Trump said Tuesday. “And it will be a very, very powerful document.”
The White House and Republican leaders will propose slashing the corporate tax rate from 35 percent to 20 percent and call for lowering the rate many high-
income businesses pay through the individual income tax code to 25 percent, said the people, who spoke on the condition of anonymity because they were not authorized to discuss the internal negotiations.
The plan is expected to include other incentives meant to spur companies to invest, such as one that will let them write off investments in things such as equipment for at least five years.
In addition, Republicans will call for lowering the top tax bracket for individuals and families from the current 39.6 percent to 35 percent, but they also will ask lawmakers to consider imposing a new, higher rate to ensure that the wealthy do not end up receiving a disproportionate tax cut, compared with the middle class and low-income families. This could include charging them a higher tax rate — but as with many other areas, no final decisions have been made.
There are currently seven individual income tax brackets, and the GOP plan would collapse those into three: one at 12 percent of income, one at 25 percent and one at 35 percent. The GOP framework will not specify which income level triggers specific tax rates, leaving those decisions to be made later by lawmakers.
Republicans plan, however, to shield more income for low-income and middle-class Americans from taxation as one way to deliver a big tax cut.
Republicans also will propose nearly doubling the standard deduction, which allows people to lower their taxable income without specifying details such as charitable contributions or the interest paid on their mortgages.
They will propose expanding the child tax credit by increasing the income level at which this benefit phases out for workers. They also will call for eliminating provisions of the tax code that push married couples into higher tax brackets based on their combined income, a dynamic often referred to as a “marriage penalty.”
Further, the GOP plan will call for eliminating the estate tax, which wealthy families must pay to transfer assets after someone dies.
As Republican leaders tout their tax blueprint, they plan to argue that it would lead to a wave of economic growth, new jobs and better wages if passed into law.
Trump told a group of Democrats and Republicans on Tuesday that the tax framework could lead the economy to grow more than 6 percent a year, more than double what even his advisers had hoped for and a rate that many economists say is preposterous.
These proposals will be targets, not set-in-stone demands. Lawmakers are expected to debate and negotiate tweaks, leaving the figures open to multiple changes.
The GOP plan largely will stop short of wading into the hardest part of the tax code, which is eliminating breaks that businesses and families use to lower their taxes. Republican leaders want Congress to debate those changes and make them later in the process. Only a few will be named in the document Wednesday.
Tax proposals from past White House teams, led by Republicans and Democrats, have included hundreds of pages of details and line items, specifying precisely which tax breaks should be eliminated and how much it would cost to add a new benefit.
The Trump administration decided to approach the issue much differently, worried that lawmakers would balk if they believed that the White House had cut a secret tax deal behind closed doors. But by deferring many of the toughest decisions to lawmakers, the White House gives more Republicans an opportunity to have a say in what the changes look like. It also opens up the process to prolonged bickering and foot-dragging, which has sidelined previous tax efforts for decades.
The primary tax break that the White House and Republican leaders aim to target is a provision that allows families and businesses to take a federal deduction for taxes paid to state or local governments. Eliminating this provision would have an outsize impact on states with relatively high tax rates — such as New York, California, Illinois and New Jersey — and it could, according to some estimates, raise $1.5 trillion in taxes over 10 years.