President Donald Trump's administration on Wednesday rolled out a tax plan that proposes to slash corporate taxes, tweak personal tax rates, and eliminate most deductions used by more affluent Americans.
The plan was announced by Treasury Secretary Steven Mnuchin and National Economic Council Director Gary Cohn during a White House press briefing.
While the plan contains broad outlines rather than firm legislative text, Mnuchin and Cohn said the plan would include "the biggest tax cut" in US history, echoing statements made by Trump.
While Mnuchin did not apply a deadline to passing a tax plan, he told an event hosted by The Hill earlier Wednesday that the White House and congressional leaders wanted to pass a bill "as quickly as possible."
The plan did not include a large number of key details include the income levels associated with a new three tax bracket system, the tax rate for a one-time repatriation of corporate profits held overseas, and more.
Here are the key points of the plan as it was released:
Corporate tax rate of 15%: Such a rate would deliver on Trump's campaign promise; the current federal statutory rate is 35%.
Allows pass-through rate for business owners: Instead of self-owned businesses being taxed at the personal income rate, business owners would have incomes from operations taxed at the 15% rate. So if you own your own business, income from that business would be taxed at the corporate rate. According to The Times, that could apply to the Trump Organization.
No border-adjustment tax: The tax on imports was favored by House GOP leaders such as Speaker Paul Ryan and Kevin Brady, the chair of the Ways and Means Committee. Mnuchin said the White House talked to Ryan and Brady but thought the tax did not "work in its current form."
A slight adjustment to individual tax rates: White House officials said there will be three tax brackets with rates of 35%, 25%, and 10%, down from the current 7 brackets and the code would be "simplified." Cohn told reporters that he did not have the exact incomes associated with the brackets.
Double the standard individual tax deduction: This would allow individual filers to deduct their first $12,700 in income from their taxes and $25,400 for joint filers, as opposed to the current $6,350 for individuals and $12,700 for joint filers.
A one-time repatriation tax: This would allow companies to bring back money from overseas to the US with a slightly lower, one-time tax. The White House did not clarify the rate at which this money would be taxed. President George Bush enacted a repatriation tax at a 5.25% rate in 2004, but studies show the money brought back mostly went to stock buybacks and dividends rather than hiring workers.
Eliminate the estate tax: This would eliminate a tax on assets being transferred via a will after someone dies.
A change in tax exemptions for the middle class: According to The Times, the plan will propose an increase in the standard deduction for individuals.
Eliminate itemized tax deductions other than charitable donations and mortgage payments: Mnuchin said this provision would close "loopholes" and offset the decrease in base tax rate for high income Americans.
Repeal 3.8% tax on net investment income: The tax was levied on "individuals, estates and trusts" with higher than a certain threshold in investment income. For instance, the threshold for an individual was $200,000 in investment income last year.
Repeal the alternative minimum tax: This requires some people that have large amounts of deductions to calculate their income tax under the normal tax rate and the alternative and pay the higher amount. According to the Tax Policy Center, this was originally designed to eliminate large deductions by wealthier individuals, but not applies to roughly 5 million people.
No infrastructure spending: Reports on Tuesday said Trump was considering including infrastructure spending in the plan to try to win over Democrats. Mnuchin denied the report in the speech, saying the proposal would be "just a tax plan."
Here's a one-page summary of the tax plan provided to reporters during a White House briefing:
Mnuchin said the bill would be paid for through economic growth. This uses a formula called dynamic scoring, which uses assumptions that gross domestic product will grow because of increased spending to make up revenue that is cut in the tax bill. The Treasury secretary told the crowd Wednesday that he expected sustained annual GDP growth of 3%.
In response to the Trump plan, Republican congressional leaders released a statement praising the plan and saying ti will "serve as critical guideposts for Congress and the Administration" in the tax cut negotiations. Here's the full statement from House Speaker Paul Ryan, Senate Majority Leader Mitch McConnell, House Ways & Means Committee Chairman Kevin Brady, and Senate Finance Committee Chairman Orrin Hatch:
"The principles outlined by the Trump Administration today will serve as critical guideposts for Congress and the Administration as we work together to overhaul the American tax system and ensure middle-class families and job creators are better positioned for the 21st century economy. Lower rates for individuals and families will allow them to keep more of their hard-earned money and empower them to invest more in their future. Getting tax rates down for American companies, big and small, will create new jobs and make the United States a more inviting place to do business. With an eye toward fairness and simplicity, we’re confident we can rebuild our tax code in a way that will grow our economy, better promote savings and investment, provide our job creators with a competitive advantage, and bring prosperity to all Americans."
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