With the push to repeal ObamaCare all but dead for now, President Trump and Republicans are moving on to their next big initiative: reform of the tax code. Trump and the GOP are releasing the broad strokes of their plan Wednesday, and the president will try to rally support for it during a speech in Indiana by pitching it as a tax cut for the middle class, as well as for businesses. The Washington Post obtained a blueprint of the plan, which leaves much up in the air, including which tax benefits to ditch in order to make up an estimated revenue shortfall of $5 trillion over 10 years. Some highlights:
- Corporations: The New York Times reports that the plan calls for a steep reduction in the tax rate paid by corporations from 35% to 20%, which Trump sees as vital to stimulating the economy.
- Standard deduction: This would roughly double to $12,000 for individuals and $24,000 for married couples, "meaning Trump can accurately argue that many more low income earners would pay no tax under his plan," writes Jonathan Swan at Axios. But:
- The fine print: The savings in the larger deduction isn't quite as big as it appears, notes Business Insider, pointing to the fine print: "To simplify the tax rules, the additional standard deduction and the personal exemptions for taxpayer and spouse are consolidated into this larger standard deduction." For example, a single person with no dependents currently takes the standard deduction of $6,350, plus one personal exemption of $4,050. The new plan replaces that with a single deduction of $12,000, or a 15% increase.
- Wealthiest: Though initial plans called for a reduction in the top rate paid by the wealthiest individuals (those who make more than $418,000) from 39.6% to 35%, Politico reports that this is "now open to negotiation." That's partly because Trump wants to make sure Democrats are on board, reports CNN. Another idea being floated is to impose some kind of tax surcharge on the wealthiest Americans. The plan also calls for the elimination of the estate tax and the alternative-minimum tax.
- Lowest rate: It would reportedly rise from 10% to 12%, though the increase for low-income Americans would likely be offset by the bigger standard deduction.
- Simplification: The current system has seven brackets ranging from 10% to 39.6%. Trump wants to reduce the number of brackets to three, perhaps from 12% to 35%, reports the Hill. (Income levels for each have not been determined, and it's possible a fourth bracket would be added for the wealthiest Americans.) Under the changes, Trump says most Americans would be able to fill out their taxes on a single page, reports the AP.
- Elderly parents: A new credit of up to $500 would be created for those caring for non-child dependents, including parents, per USA Today. The newspaper's roundup also notes that people would no longer be able to deduct state and local income or property taxes, which would hurt residents in high-tax states such as California and New York.
- More details: Business Insider has a comprehensive roundup of what is known about the plan, including a 25% rate for "pass-through businesses," which applies to those who own their own business The plan would also increase the Child Tax Credit, an idea championed by Ivanka Trump.
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