26 Apr White House Proposes Massive Tax Cut Package
White House officials outlined President Donald Trump’s tax plan Wednesday, a proposal Treasury Secretary Steve Mnuchin is calling “the biggest tax cut and the largest tax reform in the history of this country.” Mnuchin stated the goal of the plan is to create jobs and economic growth. The dramatic overhaul of the tax code calls for sharply lower rates for individuals and businesses but also eliminates key tax breaks.
White House officials provided a one-page outline summarizing the goals of the tax overhaul. Below are the key components of the tax proposal.
Reduced corporate tax rate: Trump’s plan will slash the top tax rate for all businesses to 15%, as he proposed during the campaign. That’s well below the top rate of 35% for corporations today. A drop to 15% would also be a huge drop from the 39.6% top rate paid by owners and shareholders of so-called pass-through businesses. These businesses range from mom-and-pop shops to law firms and hedge funds.
Lower individual income tax rates: The current seven individual income tax brackets would be collapsed into three: 10%, 25%, and 35%.
One-time tax on overseas profits: The White House said there will be a “one-time tax” on the trillions of dollars held by corporations overseas. The rate as yet to be determined and the White House stated it is working with the House and Senate on a competitive repatriation rate.
Switch to a territorial tax system: Currently, U.S. companies must pay tax on all their profits, regardless of where in the world those profits are earned. The switch to a territorial system for businesses means U.S. companies would only owe U.S. tax on what they earn in the United States.
Eliminate estate tax and alternative minimum tax: The alternative minimum tax, the estate tax, and Obamacare’s 3.8 % surtax on net investment income for high earners would all be eliminated.
Eliminate most deductions: The proposal calls for eliminating tax deductions, with only a few exceptions, including mortgage interest and charitable contribution deductions. The proposal would double the standard deduction, essentially eliminating taxes on the first $24,000 of a couple’s earnings.
Officials said the underlying goal is to simplify the tax system and to help middle-class Americans. Officials seem confident that the principles outlined by the Trump Administration will serve as a vital guide for Congress and the Administration as they work together to overhaul the tax system.