GOP Tax Plan Slashes Tax Rate for Many Americans, Corporations

WASHINGTON (CN) – President Donald Trump predicted on Wednesday that Democrats will work with Republicans on their newly unveiled tax reform plan and implored voters to put pressure on those who won’t.

Speaking at an event in Indianapolis Wednesday afternoon, Trump lauded the new tax framework as a simpler, more fair system that will help grow the American economy.

“With your help and your voice we will bring back our jobs, we will bring back our wealth and for every citizen in this land we will bring back our great American dreams,” Trump said at the event.

Congressional Republicans released the framework of a tax system overhaul on Wednesday that calls for drastically reducing the number of tax brackets, slashing the corporate tax rate and changing the way companies are taxed in the hopes that more will choose to keep their money in the United States.

The plan is not a detailed piece of legislation but rather a “framework” that congressional committees will eventually shape into a bill. The plan calls for a simplified “postcard” tax filing for most Americans and aims to stop companies from sending jobs overseas to avoid taxes in the United States.

“We are making our taxes simple again,” Trump said of the shorter filing system. “We are simplifying our tax system.”

The framework cuts the number of tax brackets from seven to three, with the lowest bracket paying a 12 percent rate, the middle bracket 25 percent and the top bracket 35 percent. That would mean an increase of 2 percentage points for the lowest tax bracket and a cut of more than 4 percentage points for the highest earners.

However, the plan also calls for the near doubling of the standard deduction individuals can claim on their taxes while also eliminating most of the itemized deductions people can claim instead of taking the standard rate. By increasing the standard deduction to $12,000 for single people and $24,000 for married couples, senior administration officials argued in a press call on Tuesday that more middle and low income people would pay no taxes on a large portion of their incomes, offsetting the slight bump in their overall rate.

Although it repeals “most” itemized deductions, the plan keeps in place deductions for home mortgage interest and charitable giving.

Congressional committees will also have an option to add an additional tax bracket above the top rate if necessary to make the new plan “at least as progressive” as the old plan, according to the nine-page framework.

The framework does not specify the level of income included in each bracket, nor does it detail the exact increase in the child tax credit, another portion of the tax plan that senior administration officials pointed to as a way the framework reduces taxes on people in the lower brackets.

The plan would repeal both the alternative minimum tax and the so-called death tax.

On the corporate side, the plan would slash the corporate tax rate to 20 percent, putting the United States below the industrialized world average of 22.5 percent. Small business, meanwhile,  would pay a 25 percent rate.

The plan also changes the way international companies are taxed by transitioning to a territorial system in which business are taxed only on income earned in the United States. Senior administration officials say this would help encourage companies to keep more money in the United States because they wouldn’t be have to pay the difference between the rate in a foreign country and the U.S. rate.

Calling back to the days of his campaign for president, Trump promised the changes to the tax code would make American companies more competitive with those that operate in countries overseas that have lower tax rates.

“This is a revolutionary change and the biggest winners will be the everyday American workers as jobs start pouring into our country, as companies start competing for American labor and as wages start going up at levels you haven’t seen in many years,” Trump said.

Familiar battle lines emerged on the legislation soon after the framework was released, with Republicans praising it as a potentially historic reform package and Democrats arguing it disproportionately favors the wealthy.

“After a decade of lost growth, hardworking American families know the status quo is unacceptable,” Senate Majority Leader Mitch McConnell, R-Ky., said in a statement. “They want to keep more of their hard earned money so they can make ends meet, provide for their children and save for retirement. We need to make it easier for America to compete here at home and overseas. It’s time to take more money out of Washington’s pockets and put more of it in the pockets of Americans.”

Meanwhile Sen. Bernie Sanders, I-Vt., targeted the plan’s call to repeal the estate tax as an example of why the plan would favor the wealthy at the expense of lower income people.

“At a time of massive wealth and income inequality, President Trump’s tax plan is morally repugnant and bad economic policy,” Sanders said in a statement. The last thing we should be doing right now is providing hundreds of billions in tax breaks to the wealthiest people and most profitable corporations in this country.”

Republicans are expected to use the budget reconciliation process to pass the legislation, allowing them to clear the Senate with only 50 votes with Vice President Mike Pence’s serving as a tie breaker. That would mean no Democrats, who have been roundly critical of the proposal, would have to come onboard for it to succeed.

Nevertheless, Trump predicted that Democrats would support the bill. He also threatened to campaign against Indiana Democrat Sen. Joe Donnelly “like you wouldn’t believe” if he did not join Republicans in passing the tax plan.

“My fellow Americans, this is the right tax cut and this is the right time,” Trump said at the speech. “Democrats and Republicans in Congress should come together, finally, to deliver this giant win for the American people and begin middle class miracle – it’s called a middle class miracle – once again.”

%d bloggers like this: